The following is a description of manufacturing com- pany’s purchasing procedures. All computers in the com- pany are networked to a centralized accounting system so that each terminal has full access to a common database. The inventory control clerk periodically checks in- ventory levels from a computer terminal to identify items that need to be ordered. Once the clerk feels in- ventory is too low, he chooses a supplier and creates a purchase order from the terminal by adding a record to the purchase order file. The clerk prints a hard copy of the purchase order and mails it to the vendor. An elec- tronic notification is also sent to accounts payable and receiving, giving the clerks of each department access to the purchase order from their respective terminals. When the raw materials arrive at the unloading dock, a receiving clerk prints a copy of the purchase order from his terminal and reconciles it to the packing slip. The clerk then creates a receiving report on a computer system. An electronic notification is sent to accounts payable and inventory control, giving the respective clerks access to the receiving report. The inventory con- trol clerk then updates the inventory records. When the accounts payable clerk receives a hard- copy invoice from the vendor, she reconciles the invoice with the digital purchase order and receiving report and prepares a paper cash disbursements voucher. The cash disbursements voucher and invoice are placed in the open accounts payable file in a filing cabinet until the due date. The clerk also updates the accounts pay- able subsidiary ledger and records the liability amount in the purchase journal from the department computer ter- minal. The accounts payable clerk periodically reviews the cash disbursement file for items due and, when they are identified, prepares a check for the amount due. Finally, using the department terminal, the clerk removes the liability from the accounts payable subsidiary file and posts the disbursement to the cash account. What is the internal control weakness?
The following is a description of manufacturing com-
pany’s purchasing procedures. All computers in the com-
pany are networked to a centralized accounting system so
that each terminal has full access to a common database.
The inventory control clerk periodically checks in-
ventory levels from a computer terminal to identify
items that need to be ordered. Once the clerk feels in-
ventory is too low, he chooses a supplier and creates a
purchase order from the terminal by adding a record to
the purchase order file. The clerk prints a hard copy of
the purchase order and mails it to the vendor. An elec-
tronic notification is also sent to accounts payable and
receiving, giving the clerks of each department access
to the purchase order from their respective terminals.
When the raw materials arrive at the unloading dock,
a receiving clerk prints a copy of the purchase order
from his terminal and reconciles it to the packing slip.
The clerk then creates a receiving report on a computer
system. An electronic notification is sent to accounts
payable and inventory control, giving the respective
clerks access to the receiving report. The inventory con-
trol clerk then updates the inventory records.
When the accounts payable clerk receives a hard-
copy invoice from the vendor, she reconciles the
invoice with the digital purchase order and receiving
report and prepares a paper cash disbursements voucher.
The cash disbursements voucher and invoice are placed
in the open accounts payable file in a filing cabinet until
the due date. The clerk also updates the accounts pay-
able subsidiary ledger and records the liability amount in
the purchase journal from the department computer ter-
minal. The accounts payable clerk periodically reviews
the cash disbursement file for items due and, when they
are identified, prepares a check for the amount due.
Finally, using the department terminal, the clerk removes
the liability from the accounts payable subsidiary file and
posts the disbursement to the cash account.
What is the internal control weakness?
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