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Business
Operations Management
Top Top Ten Sdn. Bhd. is a leading manufacturer of disposable rubber gloves and provide high quality gloves at the efficient low cost. The demand for this commodity has been growing throughout the Covid-19 pandemic. The organization has recently encountered market inefficiencies in inventory levels and inventory kept in the storeroom. Therefore, the management of the company agreed to hire an external system auditor to review their process of expenditure. The purchasing process of the firm is listed below:

Top Top Ten Sdn. Bhd. is a leading manufacturer of disposable rubber gloves and provide high quality gloves at the efficient low cost. The demand for this commodity has been growing throughout the Covid-19 pandemic. The organization has recently encountered market inefficiencies in inventory levels and inventory kept in the storeroom. Therefore, the management of the company agreed to hire an external system auditor to review their process of expenditure. The purchasing process of the firm is listed below:

Purchasing and Supply Chain Management
Purchasing and Supply Chain Management
6th Edition
ISBN:9781285869681
Author:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson
Publisher:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson
ChapterC: Cases
Section: Chapter Questions
Problem 5.2SC: Scenario 3 Ben Gibson, the purchasing manager at Coastal Products, was reviewing purchasing...
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(i)

Analyze the physical control weaknesses in the above process. Model youranswer according to the SIX (6) physical control weaknesses in the expenditure cycle of Top Top Ten Sdn. Bhd.

(ii)

Make SIX (6) recommendations for improving the above expenditure procedures.

Top Top Ten Sdn. Bhd. is a leading manufacturer of disposable rubber gloves and provide high quality gloves at the efficient low cost. The demand for this commodity has been growing throughout the Covid-19 pandemic. The organization has recently encountered market inefficiencies in inventory levels and inventory kept in the storeroom. Therefore, the management of the company agreed to hire an external system auditor to review their process of expenditure. The purchasing process of the firm is listed below: Purchase system When the inventory quantity falls to a reorder level, the storeroom clerk selects a supplier and manually prepares three (3) hardcopies of a purchase order. The clerk sends copy 1 of purchase order to the supplier, copy 2 to the general ledger department, and copy 3 to the receiving department to be used to verify the receipt of goods when it arrived. The receiving clerk compares the packing slip that was sent along with the goods to the purchase order sent earlier by the storeroom clerk when the goods arrive at the receiving department. After that, the clerks sign the purchasing order and send it to the accounting department after verification of the amounts and the items on the packing slip match those listed in the purchase order. Then the goods are sent to the storeroom. Once the goods received, the storeroom clerk uses the copy of purchase order to update the inventory subsidiary ledger to reflect the receipts of goods. At the accounting department, the account payable clerk receives the supplier's invoice and immediately matches and reconciles with the purchase order from the receiving department. To represent the new accounts payable, the account payable clerk updates the account payable subsidiary ledger and records the purchase journal.
Transcribed Image Text:Top Top Ten Sdn. Bhd. is a leading manufacturer of disposable rubber gloves and provide high quality gloves at the efficient low cost. The demand for this commodity has been growing throughout the Covid-19 pandemic. The organization has recently encountered market inefficiencies in inventory levels and inventory kept in the storeroom. Therefore, the management of the company agreed to hire an external system auditor to review their process of expenditure. The purchasing process of the firm is listed below: Purchase system When the inventory quantity falls to a reorder level, the storeroom clerk selects a supplier and manually prepares three (3) hardcopies of a purchase order. The clerk sends copy 1 of purchase order to the supplier, copy 2 to the general ledger department, and copy 3 to the receiving department to be used to verify the receipt of goods when it arrived. The receiving clerk compares the packing slip that was sent along with the goods to the purchase order sent earlier by the storeroom clerk when the goods arrive at the receiving department. After that, the clerks sign the purchasing order and send it to the accounting department after verification of the amounts and the items on the packing slip match those listed in the purchase order. Then the goods are sent to the storeroom. Once the goods received, the storeroom clerk uses the copy of purchase order to update the inventory subsidiary ledger to reflect the receipts of goods. At the accounting department, the account payable clerk receives the supplier's invoice and immediately matches and reconciles with the purchase order from the receiving department. To represent the new accounts payable, the account payable clerk updates the account payable subsidiary ledger and records the purchase journal.
Cash disbursement system The clerk reviews the account payable at the account payable department on the nearest due date, cross-checks them against the supplier's invoice issued, and prints out a cash disbursement voucher for the invoices due for payment. For payment purposes, the clerk dispatches the cash disbursement voucher to the cash disbursement department. Then, a hard copy of the account payable summary is printed by the clerk and sent to the general ledger department for the records to be updated. The cash disbursement clerk uses the cash disbursement voucher to enter the records in the digital cash register. Then, the checks are printed and submitted for approval to the cash disbursement manager and, after approval, the checks are sent for payment to the supplier.
Transcribed Image Text:Cash disbursement system The clerk reviews the account payable at the account payable department on the nearest due date, cross-checks them against the supplier's invoice issued, and prints out a cash disbursement voucher for the invoices due for payment. For payment purposes, the clerk dispatches the cash disbursement voucher to the cash disbursement department. Then, a hard copy of the account payable summary is printed by the clerk and sent to the general ledger department for the records to be updated. The cash disbursement clerk uses the cash disbursement voucher to enter the records in the digital cash register. Then, the checks are printed and submitted for approval to the cash disbursement manager and, after approval, the checks are sent for payment to the supplier.
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