The material below describes the role of purchasing, receiving, and accounts payable in the Perth Precision Manufacturing Company (PPMC)'s special ordering system. The material includes a narrative and a flowchart (see Figure 1).
Required:
Using the template underneath Figure 1:
(a) Identify and explain a total of six (6) weaknesses (specifically focusing on threats that are not adequately addressed by controls) with the special ordering system, including a very brief explanation of how each weakness represents a potential problem. In your answer, you must describe:
two (2) weaknesses with the purchasing procedures
two (2) weaknesses with the receiving procedures, and
two (2) weaknesses with the accounts payable procedures.
(b) For each of the six (6) weaknesses identified (two per process), you must recommend a modification (either changes in process activities or suggested controls) that can be made to procedures to address the identified weakness.
DEPARTMENT | WEAKNESS | SOLUTION |
PURCHASING | VERBAL ORDER BY BUYER | BUYER SHOULD GIVE WRITTEN ORDER |
PURCHASING | BUYER REVIEWS UNFILED FILE ONCE A MONTH | HE SHOULD REVIEW IT WEEKLY OR AFTER EVERY ORDER. |
RECEIVING | RECEIVING CLERK VERBALLY INFORMS THE PURCHASING DEPARTMENT THAT GOODS ARE RECEIVED | HE SHOULD INFORM HIM IN WRITTEN TO MAINTAIN THE RECORD |
RECEIVING | RECEIVING CLERK DIDNOT INFORM PURCHASING DEPARTMENT ABOUT THE DIFFERENCE OF RECEIVED AND ORDER QUANTITY. | RECEIVING CLERK SHOULD INFORM PURCHASING DEPARTMENT ABOUT THE DIFFERENCE OF RECEIVED AND ORDER QUANTITY. |
ACCOUNTS PAYABLE | PAYABLE CREATED IN EQUIPMENT ACCOUNT | IT SHOULD BE CREATED IN COMPANIES/ BUYERS CAPITAL ACCOUNT |
ACCOUNTS PAYABLE | PAYMENTS ARE AFTER DUE DATE AND THEN PURCHASE ORDER IS FILED. | PAYMENTS SHOULD BE MADE BEFORE DUE DATE AND LETTER OF AUTHORIZATION SHOULD BE ISSUED BEFORE DUE DATE. |
The material below describes the role of purchasing, receiving, and accounts payable in the Perth Precision Manufacturing Company (PPMC)'s special ordering system
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