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1. Purchase and Payments
FUNCTION POTENTIAL
MISSTATEMENT
NECESSARY
CONTROL
POSSIBLE TEST OF
OPERATING
EFFECTIVENESS
INITIALS DATE
Requisitioning
goods and
services
Goods may be
requisitioned for
unauthorised
purposes
General and specific
authorisation
procedures
Inquire about
procedures September 10, 2020
Preparing
purchase
orders
Purchases may be
made for
unauthorised
purposes
Approved purchase
requisition for each
order
Examine purchase
orders for approved
requisitions
September 10, 2020
Receiving
goods
Goods received may
not have been
ordered
Incorrect quantities,
damaged goods, or
incorrect items may
be received
Approved purchase
order for each
shipment
Receiving clerks to
count, inspect and
compare goods
received with
purchase order
Examine goods
received note for
matching purchase
order
Observe performance
by receiving clerks
September 10, 2020
Storing goods
received for
inventory
Stores clerks may
deny taking custody
of purchased goods
Obtain signed
receiptupon delivery
of goods from
Receiving to Stores
Inspect signed
receipts September 10, 2020
Approving the
invoice
Invoices may be
recorded for goods
not ordered
Matching purchase
order and goods
received note with
supplier’s invoice
Examine supporting
documentation for
invoices
September 10, 2020
Recording the
liability
Invoices may be
recorded incorrectly
or not recorded
Independent check
of agreement of
prelist against
amounts recorded in
purchase journal
Periodic accounting
for pre-numbered
goods received
notes and purchase
orders
Periodic
performance reviews
by management of
reports comparing
actual asset,
payables and
expense balances
with budgeted
amounts
Examine evidence of
independent check;
reperform
independent check
Observe procedure;
reperform
Inquire of
management about
results of
performance reviews;
inspect reports
September 10, 2020

2. Trade Payables
Errors and irregularities include:
1. Purchases may have been recorded to the wrong account
2. A liability may have been setup for a fictitious company
3. The purchase and liability may have been recorded in the wrong accounting period
4. A purchase or liability may have been omitted
5. Purchases may have been recorded butthe merchandise may notbeen received.
YES NO COMMENTS
Has a purchase requisition to be raised for all
purchases?
With this document, procurement doesn’t order goods
directly from vendors but instead initiates a formal
process. And that process is what provides the
company internal control over the purchasing process
Is the purchase requisition pre-numbered? Financial documents should be pre-numbered to
ensure all transactions are recorded and accounted
for.
Has a purchase order to be raised for all
purchases?
It necessary to be recorded in the books by the
account manager
Are purchase orders pre-numbered? Pre-numbered purchase orders ensure the
completeness and identify “missing” orders.
Do purchase orders have to be approved? For any purchase order to be a legally binding contract,
it must pass the internal approval processes ofboth
the buyer and vendor.
Are vendor’s monthly statements reconciled to
the purchase ledger?
Reconciling your vendor statements allows you to
ensure that there are no mistakes or inaccuracies
between what the vendor is charging you and the
inventory, services or supplies you received
Do adjustments to accounts payable require
the approval ofa responsible official?
It is required that adjustments to accounts payable be
approved by a responsible official.
Are all vendors’ invoices checked for proper
pricing, extensions,footings, and terms?
Invoices are checked occasionally.
Does the company ensure that claims for
damaged merchandise are processed
promptly?
When there is any problem with the delivery, then the
goods are returned with the driver and the purchase
ledger clerk is informed.
Are unmatched invoices, receiving reports,
and purchase invoices reviewed periodically?
Timely payments are ensured by periodic reviews of
files of unmatched receiving reports and invoices and
by the aging of open accounts payable
Are supporting documents reviewed by
cheque signers prior to payment?
It should be reviewed from Purchase Ledger to the
authorization ofthe paymentand before it is signed by
the cheque signers.
Are supporting documents stamped
“cancelled” by the cheque signers?
Cheque is passed to the cheque signers together with
the supporting documents
Are cheques mailed directly by the person
signing the cheque and notreturned to the
preparers?
It is returned to the preparers to write in the cash book
and post the cheque to the supplier