Purchase and Payments

FUNCTION POTENTIAL NECESSARY CONTROL POSSIBLE TEST OF INITIALS

MISSTATEMENT OPERATING DATE
EFFECTIVENESS
Requisitioni Goods may be General and specific Inquire about
ng goods requisitioned for authorisation procedures
and services unauthorised procedures
purposes
Preparing Purchases may be Approved purchase Examine purchase
purchase made for requisition for each orders for approved
orders unauthorised order requisitions
purposes
Receiving Goods received Approved purchase Examine goods received
goods may not have order for each shipment note for matching
been ordered purchase order
Receiving clerks to
count, inspect and Observe performance
compare goods by receiving clerks
Incorrect received with purchase
quantities, order
damaged goods,
or incorrect items
may be received

Storing Stores clerks may Obtain signed receipt Inspect signed receipts
goods deny taking upon delivery of goods
received for custody of from Receiving to
inventory purchased goods Stores
Approving Invoices may be Matching purchase Examine supporting
the invoice recorded for goods order and goods documentation for
not ordered received note with invoices
supplier’s invoice
Recording Invoices may be Independent check of Examine evidence of
the liability recorded agreement of prelist independent check;
incorrectly or not against amounts reperform independent
recorded recorded in purchase check
journal

Observe procedure;
reperform
Periodic accounting for
pre-numbered goods
received notes and Inquire of management
purchase orders about results of
performance reviews;
Periodic performance inspect reports
reviews by
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.

Has a purchase requisition to be
raised for all purchases?
Is the purchase requisition pre-
numbered?
Has a purchase order to be raised
for all purchases?
Are purchase orders pre-
numbered?
Do purchase orders have to be
approved?
Are vendor’s monthly statements
reconciled to the purchase ledger?
Do adjustments to accounts
payable require the approval of a
responsible official?
Are all vendors’ invoices checked
for proper pricing, extensions,
footings, and terms?
Does the company ensure that
claims for damaged merchandise
are processed promptly?
Are unmatched invoices, receiving
reports, and purchase invoices
reviewed periodically?
Are supporting documents
reviewed by cheque signers prior
to payment?
Are supporting documents
stamped “cancelled” by the
cheque signers?
Are cheques mailed directly by the
person signing the cheque and not
returned to the preparers?
YES NO COMMENTS
 Requisition number is recorded from the
purchase requisition. It is necessary to serve
the customers clearly.
 Necessary to trace the purchase request
 It necessary to be recorded in the books by the
account manager
 Purchase orders should be pre-numbered to
ensure completeness and identify “missing”
orders.
 It is required to approved a purchase order
before it is sent to the supplier.
 To ensure and identify payments you made or
discounts from vendor has not passed, or pricing
claims and returns that have not yet been
credited. 
 It is required that adjustments to accounts
payable be approved by a responsible official.
 Invoices are checked occasionally.
 When there is any problem with the delivery,
then the goods are returned with the driver
and the purchase ledger clerk is informed.
 Cheque is passed to the cheque signers
together with the supporting documents
 It is returned to the preparers to write in the
cash book and post the cheque to the supplier