Summary
Summary Cycles
- Course
- Institution
- Book
Easy to understand summaries with risks and weaknesses
[Show more]
Connected book
Book Title:
Author(s):
- Edition:
- ISBN:
- Edition:
More summaries for
-
planning phase- audit phase
-
planning phase in the audit
-
Auditing 288/388 Summary
Seller
Follow
evahmbowane
Reviews received
Content preview
LA 1.3.2 Purchase and payment cycle* All documentation should be pre-numbered with a unique number generated by the accounting system- control to
protect against fraud and prevent missing documentation
* If documents are traced back from where it originated, it is for validity
* If documents are matched for quantity and description, it is for accuracy (not validity, e.g. both documents could
be fake)
1. Purchase Requisition
Occurs in various originating departments
Objective
To ensure the entity's operational and sales requirements are met continuously and on a timely basis.
Exists because of a need for new inventory
Controls
1. Inventory controller/ staff member in originating department determines a need and a re-order level, either
through a system (programmed limit tests, warns if low inventory), a regular inventory count or forecasts/budgets
(based on market research/historical data)
2. Inventory controller creates and sends a pre-numbered purchase requisition with details of product quantity, type
and description of delivery to the inventory manager
3. Inventory manager (not in procurement department) approves that the requisition is accurate by matching the
description and quantity with the need, signs it and sends it to the procurement department
4. Supporting documentation such as reorder report, budget or specific order is attached to the requisition
5. Inventory manager files a copy of requisition for reference purposes- filed in pending file awaiting purchase order
2. Order Goods and Services
Occurs in procurement department
Objective
To ensure the purchases are from reliable suppliers, who are also cost‐effective and timely and are based on the
approved suppliers requisition.
Controls
1. Procurement (chief buyer) must investigate any suppliers who want to supply goods- only suppliers who meet
objective of reliability, timeliness, and cost-effectiveness are approved
2. If company meets requirements, they are added to the list of approved suppliers on the suppliers master file
3. Access to change suppliers Masterfile should be restricted- to prevent unauthorised suppliers from being
uploaded; and to prevent changes to e.g. banking details of suppliers- master file amendment process (form,
supporting documentation, authorised by senior, person with right authority amends the form, senior reviews
printouts of changes in master files, matches it with amendment form)
4. Buyer receives an authorised purchase requisition, and selects a supplier from the approved suppliers list (After
getting quotations from different authorised suppliers, and order according to most suitable quotation) (drop
down list for computer)
5. Company policy should state a minimum number of quotations before an order is prepared
6. Buyer confirms availability of items with supplier
7. Buyer completes a sequentially numbered (to track order and check for missing orders) purchase order with details
and price of order, and that is cross referenced with the requisition and sends it to the purchase manager
8. Purchase manager (chief buyer or second buying clerk) authorises and signs the purchase order after:
i. Checking the casts and calculations
ii. Comparing the quantities and description of the product with the requisition (for accuracy)
iii. Comparing the price on the order (if applicable) to the quotation/ price list
, iv. Confirming that the supplier is on the authorised suppliers list and reviewing the selection of quotation
(tender process)
9. Signed of purchased order given to buyer who sends it to:
i. The supplier
ii. accounting department (to match with requisition and file)
iii. receiving section of warehouse (to enable them to know what to expect and match with goods received),
iv. requisitioning department who requested the purchase (to let them know that an order was placed)
v. files a copy for reference purposes- filed numerically awaiting GRNs
10. Another clerk reperforms calculations to ensure the accuracy of the purchase order
11. When GRNs are received from the warehouse, clerk matches it with copy kept, and files it in sequence (computer
matches GRN number with purchase order number)
12. Manager reviews file on a regular basis and follows up on any long- outstanding purchase orders (not yet matched
with GRN) (Computer enables print out of log outstanding orders)
3. Receive Goods and Services from Suppliers
Occurs in warehouse
Objective
To ensure that all goods and services ordered from suppliers are received and matches the approved purchase
order
Controls
1. Inventory is delivered to the receiving section of the warehouse that is a separate receiving bay that is access
controlled (security guard, CCTV, lock etc..) and only authorised personnel are allowed access (for proper
safeguarding and avoiding goods getting mixed up with already recorded goods)
2. Goods receiving clerk (segregation from buying staff) receives supplier delivery note, and compares the quantity
and description with the purchase order
3. Receiving clerk does not accept any goods that are not on the purchase order
4. Receiving clerk compares quality (checks for inferior quality goods), quantity and description of goods actually
delivered with the delivery note and the purchase order
5. Clerk rejects items of inferior quality, and indicates it on the supplier’s delivery note, that is signed by the delivery
man and the clerk
6. Clerk acknowledges acceptance of goods by signing the supplier’s delivery note after doing the inspection and
checks
7. Clerk issues (or system automatically creates based on purchase order and details captured by clerk) a pre-printed,
sequentially numbered goods received note (GRN) for goods actually received
8. Clerk sends copies of GRN to:
i. Accounting department (together with delivery note)
ii. Procurement department (for matching with purchase requisition)
iii. Warehouse (stores) to update inventory records
iv. Filed sequentially
9. A second clerk/manager matches GRN with goods actually received for accuracy and quantity, before accepting
goods into stores for further safekeeping and signs to confirm transfer of responsibility.
10. Manager checks that all GRNs match with a purchase order for completeness
4. Record purchase
Accounting department
Objective
To ensure that all valid purchases are accurately recorded in the entity’s financial records, and in a timely manner
GRN to DN- Accuracy
GRN to PO- Validity
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller evahmbowane. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $5.71. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
67474 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy study notes for 14 years now