The University of Adelaide
The weaknesses relating to purchases and payments of â€œspecial ordersâ€ by the Willi-Billi Manufacturing Company are as follows-
No control procedure- The Willi-Billi Manufacturing Companyâ€™s special orders are having the loophole of control procedure that will entail or provides the assurance to the company regarding the prices of the suppliers as the purchasing department is having various purchasing agents who have to contact to the relevant supplier of the product by searching through various catalogs and files and they place the verbal orders with them. So there is no appropriate control procedure is established which makes sure that the supplier is correct or the prices at which we are purchasing is correct or not. No count at the time of receipt- There is no proper counting of goods is made when they are received from the suppliers as there is no person delegated who gives assurance about the same that the proper receipt of goods has been made by the supplier. No invoices at the time of purchase- Another loophole is that the purchasing department should receive the bill /invoice /written statement any which describes that the goods are purchased but there are no such invoices that have been received from the supplier. No invoices given to Accounts payable- Another loophole is that again no invoices have been sent to the accounts department for further processing. No intimation from requisition department to the payable department- There is no prior intimation has been sent by the requisitioning department that they had accepted the equipment to the recoding payable so the recoding payable should know about the same but no written intimation is made, No checking of performance- There would be no prior checking of the supplier is made by the purchasing department. They should first check the performance of the particular vendor that they are satisfying the performance criteria or not. No check on the department whether it is within budget- The purchasing department does not check the budget of the department head whether it is in the budget or not if it is not in the budget then they don't have to make such order. So the special ordering system does not check such criteria. No comparison invoice and receiving report- There is another loophole is that there is no comparison between the number of invoices and quantity of receiving the report. No verification of vendorâ€™s invoice- There is no such criteria or system in the organization which verifies the mathematical correctness of the invoices of the vendor whether they are accurate or not. Voucher packages are not provided to the treasurer.
Intimate in written notifying purchase upon delivery â€“ When the receiving department receives the product at their end they must send a copy of receiving the report to the accounts department and not merely notifying the purchasing department. So it was wrong by the receiving department that they orally notified the purchase about the same that they received the goods. So there should be the control system regarding the same. Accounts payable Department has an invoice, not the receipt notification- The accounts payable department should have in hand the invoice from the supplier not merely based on receipt notification they will record the transaction. So they must receive the receiving report to enter the transaction into the system rather than waiting for an invoice from the supplier. No checks on the budget that whether the items re approver or not- When purchasing department receives the requisition along with to verify that it was received from the purchasing department they should also check against the approved budget to ensure the types of expenditures and the amount of which was approved.
(c) The control procedures that would be recommended should be modified if Will-Billi reengineered its expenditure cycle activities to make maximum use of current IT (e.g., EDI, EFT, bar-code scanning, and electronic forms in place of paper documents) are -
IT controls should always be used as a part of an integrated enterprise resource system â€“The purchase requisition that is made by the purchase requisition department must be in an electronic document that will get convert itself into an electronic purchase order upon the approval. The purchase requisition should first go to the approvers which were having pre-authorized approval limits in them and if they are above the pre-authorized limits they should not be approved and hence then not moved ahead. And then if once approved by the approving authority the purchase order should be sent through electronic mode to the supplier/vendor. When the receiving department will receive the goods it should do a prior check of the items into the receiving report and that should be matched with the purchase order which was made by the purchasing department. If the purchase order is matched with the receiving reports then purchase order should automatically enter into the accounts payable system and the supplier invoice should be received through electronic data interchange where information is exchanged using standardized format within the various departments in the organization and the accounts payable department will pay the invoices automatically according to the terms of that. So the system should compare the mount which was requested to the remaining budget. The system should use electronic data interchange for business transactions. The vendor performance rating should be updated automatically and should be provided to the buyer so that buyer can make the acquisitions appropriately and the system must be configured to notify the accounts payable automatically of equipment receipts. The system must be configured to match invoices automatically with supporting documents and the business transactions should not permit the clerks to access quantities on the purchase orders. So the business must follow the electronic form in the place of paper documents and bare coding should be used for the transactions.
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