You have determined that the purchases system operates as follows: • When materials are required for production, the production manager sends a handwritten note to the buying manager. For orders of other items, the department manager or managing director sends a handwritten note to the buying manager. The buying manager finds a suitable supplier and raises a purchase order. The purchase orders are signed by the managing director. Purchase orders are not issued for all goods and services received by the company. • Materials for production are received by the Goods Received Department, who issue a goods received note (GRN), and sends a copy to the accounts clerk. There is no system for recording receipt of other goods and services. • The accounts clerk receives the purchase invoice and matches it with goods received notes and purchase order (if available). The managing director authorises the invoice for posting to the purchase ledger. • The accounts clerk analyses the invoice into relevant nominal ledger accounts codes and then posts it. • At the end of each month, the accounts clerk prepares a list of payables to be paid. This is approved by the managing director. • The accounts clerk prepares the cheques and remittances and posts the cheques to the purchase ledger and cashbook. • The managing director signs the cheques and accounts clerk sends the cheques and remittances to the payables. Mr. Addo and Mr. Tekpe are aware that there may be weaknesses in the above system and have asked for advice. You are required to: i. Explain five (5) control deficiencies in Supreme Ventures’s purchases system and suggest improvements to overcome the deficiencies
You have determined that the purchases system operates as follows:
• When materials are required for production, the production manager sends a
handwritten note to the buying manager. For orders of other items, the department
manager or managing director sends a handwritten note to the buying manager. The
buying manager finds a suitable supplier and raises a purchase order. The purchase
orders are signed by the managing director. Purchase orders are not issued for all
goods and services received by the company.
• Materials for production are received by the Goods Received Department, who
issue a goods received note (GRN), and sends a copy to the accounts clerk. There
is no system for recording receipt of other goods and services.
• The
received notes and purchase order (if available). The managing director authorises
the invoice for posting to the purchase ledger.
• The accounts clerk analyses the invoice into relevant nominal ledger accounts codes
and then posts it.
• At the end of each month, the accounts clerk prepares a list of payables to be paid.
This is approved by the managing director.
• The accounts clerk prepares the cheques and remittances and posts the cheques to
the purchase ledger and
• The managing director signs the cheques and accounts clerk sends the cheques and
remittances to the payables.
Mr. Addo and Mr. Tekpe are aware that there may be weaknesses in the above system
and have asked for advice.
You are required to:
i. Explain five (5) control deficiencies in Supreme Ventures’s purchases system
and suggest improvements to overcome the deficiencies
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