8.1.

Ordering (Purchases orders)

1) Orders are not (1) Authorized orders for the (1) Authorization: one person authorizes
necessary for the entity entity’s demand. the order before the order is sent to the
(Orders are made for supplier; the order is only prepared
personal use) when there is an acquisition from a
(2) Unauthorized orders department of the entity.
(2) Segregation: separate the preparing
the acquisition function-preparing the
order.
(3) Adequate documents and records:
pre-numbered acquisitions and orders.
(4) Independent check: one independent
person compares the order with the
related acquisition.
(5) Physical controls: unused orders
must be kept in a safe place.

(3) Orders were sent to (2) Orders are only sent to (1) Authorization: one person authorizes
inappropriate suppliers authorized suppliers with a list of appropriate suppliers; the goods
(unauthorized suppliers/ competitive prices. (which have prices above a specific
high prices…) level) must have approval from one
person.
(2) Segregation: separate the ordering
function-approval of suppliers function.
(3) Adequate documents and records:
only authorize the order which has the
authorized code of the supplier.
(4) Independent check: an independent
staff compares the name/code of
suppliers in the orders with the
 authorized list of suppliers; compare the
price in the order with the market prices
of goods.

8.2. Good inward and recording involves (purchase invoices)

1. Goods received are ⇒ goods received are recorded (2) segregation: separate the recording - check the signature
recorded incorrectly correctly function with the receiving function - check the continuity of unused or
(3) adequate documents and records: blank receipt note
pre-numbered - goods receipt notes - check signature and reperformance
(4) independent check (5)
- An independent person compares the ⇒ observation: observe the receiving
price/amount of the goods inward in the process to ensure that independent
purchase journal, and inventory staff appears
subsidiary ledger with the price/amount ⇒ inspection of documents: check the
in the related invoice exit of the receipt report with the
- independent staff compares the date of signature of the independent person
transactions in the inventory subsidiary
ledger with the date in the goods receipt
notes
(5) physical control + independent
check: an independent person checks
the quality, and quantity of the goods
before accepting these goods (should
compare with the order and

2. Goods received ⇒ goods are only accepted when (1) authorization: only accept the goods
without the proper order having the proper order inward when having the authorized
 orders and proper invoices.
(2) segregation of duties: should
separate the authorization of orders
function - receiving goods function
(3) independent check: an independent
person reconciles the goods receipt note
with the related/ corresponding order

8.2.2. Recording invoices (recording payable accounts)

1. goods received are payables accounts are recorded - segregation of duties: separate - check name and signature
not recorded ⇒ no correctly (amount/classification - recording function - payment function; - check signature then reperformance
proper payment accounts/period) receiving goods function - payable
2. the invoice is recording function
recorded incorrectly - independent check:
3. credit notes are not ⇒ one independent person reconciles
recorded ⇒ Payment the goods receipt notes with the payable
for unnecessary accounts subsidiary ledger (should
payables accounts compare with the invoice)
⇒ payables accounts ⇒ independent staff compare the date in
are recorded the payable accounts subsidiary ledger
incorrectly (in with the date in the invoice
comparison with the ⇒ monthly supplier statements and
receipt of the goods) compare the statement with the
amount/balances in the subsidiary
ledger
⇒ independent check of the correct
amount/mathematic in the invoice before
recording this invoice
 8.3. Payment
risks control objectives control activities tests of control

1. Payments are made ⇒ Payment are only made for (1) authorization:
false invoices/ goods received within an - Cheques: only one person/some
Payments are make for authorization specific people in the entity has/have the
the same liability twice right of approval for cheques
or more ⇒ loss of cash - Transfer: only one/ some specific
people can make transfer requirements
2. payments are ⇒ payment are recorded - Cash on hand: only one/some specific
recorded incorrectly correctly people can make the approval for
(amount, accounts, disbursement notes/
period) documents
(2) segregation of duties:
- cheques: signatory of the cheque -
person preparing the cheque/cheque
requisition-person recording the
payment
- transfer: person authorizing the
transfer-person recording the payment
- cash …
(3) adequate documents and records ⇒ check unuse/ blank documents +
- continually prenumbered cheques, check the mark on the documents +
disbursement notes, transfer check the existence of remittance
requirements advice
- mark “paid” on the invoices which were
paid;
- use the remittance advice in payment
process.
(4) independent check ⇒ check the signature of independent
- compare/match invoices - ppl on the documents +
cheques/disbursement notes/ transfer reperformance:
requirement - debit notes - accounts - check the exisstence of supplier
payable subsidiary ledgers; statements
- monthly supplier statements
(5) physical controls ⇒ observe the place of keeping
- cheques/ cash on hand are kept at the cash/cheques + observe counting
safe place process of entity
- periodly/suddenly count the unused
cheques/cash