Figure 13-11 depicts the basic activities performed in Lexsteel’s expenditure cycle. The following additional information supplements that figure:
• Because of cash flow problems, Lexsteel always pays suppliers on the last possible day before incurring a penalty for late payment. Supplier invoices are processed and paid weekly. Every Friday, the accounts payable clerk reviews and approves all invoices with a due date the following week.
• The purchasing manager reviews and approves all purchases prior to e-mailing them to suppliers.
• After counting and inspecting incoming deliveries, the receiving clerk enters the following information into the system:
Quantities received for each inventory item
Date and time received
Supplier number
• After entering that information, the receiving clerk takes the inventory to the inventory control department for storage.
• Access to the inventory control department is restricted.
• Inventory is only released to production when properly authorized request is received. When the inventory is released, the inventory control clerk updates the perpetual inventory system.
• Physical counts of inventory are taken every three months. Discrepancies between the counts and recorded quantities on hand are investigated. Upon resolution of the investigation, the plant manager authorizes adjustments to the perpetual inventory records to change them to the amount actually on hand.

Identify at least three control weaknesses in Lexsteel’s expenditure cycle. For each weakness, explain the threat and suggest how to change the procedures to mitigate thatthreat.

  • CreatedDecember 19, 2014
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