Internal Control Weaknesses
Internal Control Weaknesses
Purchase system
A purchasing system is a process for buying products and services encompassing purchase from
requisition and purchase order through product receipt and payment. Purchasing systems are a key
component of effective inventory management in that they monitor existing stock and help companies
determine what to buy, how much to buy and when to buy it. Internal Control weaknesses that can be
identified in current purchasing system are as follows:-
The clerk need to check the amount and quantity of goods with its supporting document to ensure its
accuracy.
When selecting vendors it should be based on the past reputation and not on other important factors
such as prices, terms and delivery time.
There should be a second officer to double check all the invoices, reports and orders made by clerk.
1. Daily report from Purchasing Department on accounting the sequence of pre-numbered purchase
requisitions and orders with corresponding delivery docket to make sure all have been purchased and
arrived.
2. Procedure on supplier’s selection must be based on quality, prices, terms and delivery time.
3.Daily report from Goods Inward Clerk on accounting the sequence of delivery dockets with
corresponding Receiving Report Document to determine what items have been received and not.
4.Inspection Clerk’s signature must be evident on each Delivery Docket and its corresponding Receiving
Report Documents signifying that all items received are in good condition. Written report on any items
received with damages and defects must be provided to Purchasing Department to contact the suppliers
to settle the issue.
Purchases System:
Not independently checked with stock against the purchase requisition which may result to over stock.
Sequence of the orders is not accounted including the cancelled orders which may result to misplaced
orders and no purchase transaction occurs.
Suppliers are selected based on the past reputation and not on other important factors such as prices,
terms and delivery time
All incoming goods including fixed assets are not cleared through a goods inwards / receiving
department.
5. No independent check to the validity of complaints are handled by sales order check.
6. Failure by management or those charged with governance to assess the effect of a significant
deficiency previously communicated to them.
May be next time two persons need to check the credit several time on a formal and regular basis. The
credit must have a limit to be affecting the financial in the company .Need to control the credits that are
given to the customers. All the deliveries need to have records for examples dockets or computerized.
Used dockets or an electronics dockets so that the customers could sign and the staffs can verified and
entered all the records on the computer or do filling. Any credit arising from the complaints must be
authorized by the sales manager it will minimize the chance of unexpected events. Maintaining accurate
and complete reports requires by legislation. Management and minimizing time lost correcting errors
and ensuring resources are correctly and efficiently allocated. All records and transactions are included
in the reports of business and the right amounts are recorded in correct amounts.