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INTERNAL CONTROLS PURCHASING AND
INVENTORY
Rose Hubbell
Acquisition Cycle Ordering
Receiving
Warehousing
Purchasing Receives orders for products by list from
many requestors The actual request for inventory
replenishment should be based on count or back order.
Accountability or approval for purchase The best price obtained and quality from
the chosen vendor is adequate Avoid duplicate orders creating inventory
storing costs
What are Purchase Requisitions ?
A four- part form listing product needed to replenish supplies or inventory.
First step in the acquisition’s cycle. Used to control costs by verifying need. Budget control. Kept by purchasing to verify and record orders placed to measure time between orders.
Why Use Purchase Requisitions ?
Decrease double ordering. Approval of purchase based on the existing
inventory or supply count. Decrease ordering costs Discounts on larger quantities Validation of order request serves as back up for
purchase order , warehouse ,and accounts payable
Creates number sequence record of event, date, products ordered
Warehouse Receiving Receives deliveries Documents for items delivered in GP. If purchase order numbers do not agree
with received goods management notified
Process for damaged or return items Accepted items recorded daily in GP for
posting creating record of received inventory
Updating count.
What does a receiving document accomplish?
Daily Receiving Log serves as validation and backup for posted documentation from purchasing of actual receipt of inventory date, vendor, shipper, condition and count.
Match purchase order with packing slip to verify items on back order. Communication to planners of inventory available and back order items that affect job completions.
Damaged items, return items handled immediately. Notification of management
Immediate inspection of goods by one or more individuals daily assures the quantity and quality of goods received.
Goods Received Damaged Goods Daily Receiving Report
to accounts payable. Notify Purchasing and
accounts payable when RMA created to send product back to vendor.
Credit memo requested from vendor
O.K. Goods Receiving Report to
accounts payable. Receive in GP
posting report created
Request Purchasing to post daily.
Documents matched Invoice paid
Inventory Controls Purchase Requisitions
Manager approved number sequenced
Daily Receiving Log Authenticated by manager Notification to
purchasing of differences of product received and ordered
Daily posting
Restricted Access to warehouse
Physical access
Physical inventory
Separation of duties
Audience Feedback What procedures do we use now? How can we improve them? Who is responsible? Who is accountable? Communications?
Helms, George,PH.D,CPA,CIA,CISA,CFF,CITP, Purchasing, Inventory ,and Cash Disbursements: Common Frauds and Controls, 2012, American Institute of Certified Public Accountants, Durham, NC
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