Interim visit 2

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
07, 2020
Preparing
purchase
orders
Purchases may be
made for
unauthorised
purposes
Approved
purchase
requisition for
each order
Examine purchase
orders for
approved
requisitions
September
07, 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
07, 2020
Storing goods
received for
inventory
Stores clerks may
deny taking
custody of
purchased goods
Obtain signed
receipt upon
delivery of
goods from
Receiving to
Stores
Inspect signed
receipts
September
08, 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
08, 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
Examine evidence
of independent
check; reperform
independent check
Observe
procedure;
reperform
Inquire of
management about
results of
performance
reviews; inspect
reports
September
08, 2020

2. management
of reports
comparing
actual asset,
payables and
expense
balances with
budgeted
amounts
Trade Payables
Errors and irregularities include:
1. Purchases may have been recorded to the wrong account
2. A liability may have been set up 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 but the merchandise may not been 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 of both 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 of a 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 of the payment and before it is
signed by the cheque signers.

3. 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 not returned to the
preparers?
It is returned to the preparers to write in the cash
book and post the cheque to the supplier