The purchasing agent next selects the appropriate supplier by searching the various catalogs on file. The purchasing agent then phones the supplier, requests a price quote and places a verbal order. A presumed purchase order is processed, with the original sent to the supplier and copies to the department head, receiving and account payable. One copy is also filed in the open- requisition file. When the receiving department verbally informs the purchasing agent that the item has been received, the purchase order is transferred from the open to the closed fie. Once a month, the purchasing agent reviews the open file for follow up purposes. The receiving department gets a copy of each purchase order.
When equipment is received, that copy Of the purchase order is stamped with date and noted with red ink if there is any differences between the quantity ordered and quantity received. The receiving clerk then forwarded the stamped purchase order and equipment to the requisitioning department head and verbally informs the purchasing department that the equipments were received. Upon receipt of purchase order, the account payable clerk files it in the open purchase order file. When the supplier invoice is received, it is matched with he applicable purchase order, and a payable is created by debiting the requisitioning department’s equipment account. Unpaid invoices are filed by due date. On the due date, a queue is prepared and forwarded to the treasurer for signature.
The invoice and purchase order are then filed by purchase order number in the paid invoice file. Cheeses received daily from the accounts payable clerk are sorted into two groups: those over and those under RAMMER. Cheeses for less than RAMMER are machine signed. The cashier maintains the queue signature machine’s key and the signature plate and monitors its use. For queue amounting ore than RAMMER are signed by the cashier and the treasurer. A) Draw a flowchart of Media’s special ordering system procedures. B) Discuss what could be done to improve the company’s system of internal control for “special ordering” procedures. Part II Weakness Control 1.
Buyer does not verify that department head’s request is within budget. Compare requested amount to total budget and YET expenditures. 2. No procedures established to ensure best price obtained. Solicit quotes/bids for large orders. 3. Buyer does not check vendor’s past performance. Prepare vendor performance report and use it when selecting vendors. 4. Blind counts not made by receiving. Black out quantities ordered on copy of Purchase Order sent to receiving; provide incentives if discrepancies between packing slip and actual delivery are detected. 5. Written notice of equipment receipt not sent to purchasing. Send written notice of equipment receipt to purchasing. 6.
Written notice of equipment receipt not sent to accounts payable Send written notice of equipment receipt to accounts payable 7. Mathematical accuracy of vendor invoice not verified. Verify mathematical accuracy of vendor invoice. 8. Invoice quantity not compared to receiving report quantity. Compare/verify invoiced quantity with quantity received. 9. Notification of acceptability of equipment from requesting department not obtained prior to recording payable. Obtain confirmation from requisition of the acceptability of equipment ordered prior to recording payable. 10. No alphabetic file of vendors from whom purchases are made is maintained.
Establish vendor master file. Restrict access and vouch all updates. CASE 2: PRODUCTION CYCLE The production process of Tower Holding Bad consisted of the usual planning, scheduling, and controlling of the physical products through the manufacturing process. The company’s manufacturing process begins in the reduction planning and control department. Hand, the production manager, determines the materials and operations requirements and combines information from various departments to assess the inventory requirements for production. Marketing provides the sales forecast, engineering provides the engineering specifications and inventory provides the inventory status.
When this information is combined with the bill of materials and route sheet, Hand is able to prepare purchase requisition document. The purchase requisition is then sent to purchasing and inventory control. Hosannas, as Hand’s assistant, will prepare production and control documents y comparing the bill of materials and route sheets. The documents produced are the move ticket, work order, and materials requisitions. A Copy of the work order, move ticket and material requisitions documents are sent to cost accounting. The other two copies are sent to Roger the manager in the work center. Once Roger receives the production control documents, he initiates production. Unfortunately for the company, Roger is not a good supervisor. One of Rorer’s duties is to review the job tickets which are sent to cost accounting, and the employee time cards, which are sent to payroll. Roger isn’t pay attention to the amount of time his employees spend working, so they can easily enter any time onto their time cards. Roger also doesn’t pay close attention to the production process and the use of raw materials. Roger sends the materials requisitions to the inventory department, but never sends back any excess material or returns. Materials are left in the work centre department and are used in the future if they run out of materials.
Seal, the storekeeper, in the inventory department takes the materials requisitions from the work center and releases the raw materials to the work centers. Seal then files a copy of the materials requisition and updates the inventory records with the other two copies. He then updates the material inventory records and creates a journal voucher that is sent to the accounting department. The finished goods inventory is updated and a journal voucher is created and sent to the accounting department. A copy of the materials requisition is filed and the other copy is sent to accounting. The cost accounting department will monitor the flow of cost information related to production.
Information flows from the production planning, work centers, and inventory departments. The production department sends a work order to Shania in cost accounting, which is used to initiate work-in- process recording, and then the work order is filed. The work center sends a job ticket and the production planning and control department sends a materials requisition. Shania then updates the work in process and calculates the variances. Shania creates a journal voucher and then updates the general ledger after she compares it with the journal voucher from inventory.