Simbi Michael
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| 160969 Simbi Michael NMAC 302
ii. 1. Routine purchases are initiated by inventory control by notifying the purchasing department of the need to buy goods. The purchasing department fills out a pre-numbered purchase order and gets it approved by the purchasing manager. The original of the five part purchase order goes to the vendor/supplier. The remaining four copies are for purchasing, the user department, receiving for use as a receiving report and accounts payable. This is an organised authorisation procedure that’s efficient with the signing, initialising & recording of transactions. Each department or person has a specific duty eliminating a situation where one person or department carries out multiple duties which increases the chances of fraud. Having the purchasing manager authorise purchases creates a good chain of responsibility in the department. Having multiple purchase order copies helps with the records & it’s easier to track the transaction. 2. To ensure efficiency and effectiveness, purchases of specialized goods and services are negotiated directly between the user department and vendor/supplier. Company procedures require that the user department approve invoices for any specialized goods and services before making payment. This procedure helps transactions happen faster since specialised goods for the finance department for example, have little to nothing to do with the Logistics, the direct negotiations between departments & vendors hence facilitates effectiveness. Approval of invoices ensures the fixed responsibility aspect in the control of activities so that there’s responsibility. 5. Prior to making entry in accounting records, the accounts payable staff checks the mathematical accuracy of the transaction, makes sure that all transactions are properly documented (the purchase order matches the signed receiving report or good received voucher and the vendor’s/supplier’s invoice), and obtains the respective departmental approval for special invoices. This procedure helps with the correct entry of transactions, purchases or receipts in the accounting records. Duplicate checking of calculations is a great control in ensuring accuracy which inevitably helps with honest representation of financial records & the auditing process. 6. All approved invoices are filed alphabetically. Invoices are paid on 7th and 25th of each month and all cash discounts are taken regardless of the terms. This procedure helps with the documentation & record keeping of transactions. It makes transaction easier to track & ultimately make bank reconciliations easier. Setting dates for invoice payments makes sure the departments never misses or delay payments. 8. Pre-numbered blank cheques are kept in a locked safe accessible only to the cash disbursement department. Other documents and records maintained by the accounts payable section are readily accessible to all persons assigned to the section and to others in the accounting function. This procedure is in line with the asset & records security control. The safeguarding of such documents as cheque books is important as it prevents unauthorised use from unauthorised people giving the department a fixed responsibility. 9. The Director of Finance signs all the cheques and endorses all supporting documents “PAID”. An original document is required for a payment to be processed This procedure gives a fixed responsibility to the Director of Finance ensuring that all transactions go through them. This ensures that only transactions approved by the director proceed. iii. 3. Accounts payable maintains a list of employees who have purchase order approval authority. The list was updated two years ago and is rarely used by accounts payable staff. This is a weakness because there is no clear segregation of duties. This means anyone from the department can approve authorisation thus no one has fixed responsibility of answering. This can be resolved by maintaining an up to date list that should be strictly adhered to by the staff. 4. Pre-numbered vendor/supplier invoices are recorded in an invoice register that indicates the receipt date, whether it is a special order, when a special order is sent to the requesting department for approval, and when it is returned. A review of the register indicated that there were seven open invoices for special purchases, which had been forwarded to operating departments for approval over 30 days previously and had not yet been returned. This procedure is a weakness as late payments of invoices could damage the relationship with the supplier/customer. The company should have a creditor’s age analysis so they can monito bills & invoices to pay & set a date each month when the system alerts the users that it’s time to pay 7. Tried and Tested uses a computerized accounting information system but does not have an accounts payable module. Invoices are only recognized in the ledger after payment has been processed. This procedure is a weakness because invoices have to be recorded in different accounts in the accounts payable modules for transaction tracking & reconciliation 10. The organization does not have an accounts payables control account This procedure is a weakness because the accounts payable module is necessary in a company’s accounting system. It primarily takes charge of paying the entity’s bills on a timely basis. This is important so that strong credit and long-term relationship with the vendors can be maintained. A good accounts payable process ensures there are no overdue charges, penalty or late fees to be paid for the dues thus implementing an accounts payable module in their system will be a great solution. Download 18.29 Kb. Share with your friends:
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