Question

The following flowchart depicts the activities relating to the purchasing, receiving, and accounts payable departments of Model Company, Inc. Assume that you are a supervising assistant assigned to the Model Company audit.

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Joe Werell, a beginning assistant, analyzed the flowchart and has supplemented the flow-chart by making certain inquiries of the controller. He has concluded that the internal control over purchasing, receiving, and accounts payable is strong and has provided the following list of what he refers to as internal control strengths. Review his list and for each internal control strength indicate whether you agree or disagree that each represents a strength. For those in which you disagree, briefly explain why.
Internal Control Strengths Prepared by Joe Werell
a. The department head of the requisitioning department selects the appropriate supplier.
b. Proper authorization of requisitions by department head is required before purchase orders are prepared.
c. Purchasing department makes certain that a low-cost supplier is always chosen.
d. Purchasing department assures that requisitions are within budget limits before purchase orders are prepared.
e. The adequacy of each vendor’s past record as a supplier is verified.
f. Secure facilities limit access to the goods during the receiving activity.
g. Receiving department compares its count of the quantity of goods received with that listed on its copy of the purchase order.
h. A receiving report is required for all purchases, including purchases of services.
i. The requisitioning department head independently verifies the quantity and quality of the goods received.
j. Requisitions, purchase orders, and receiving reports are matched with vendor invoices as to quantity and price.
k. Accounts payable department personnel recompute the mathematical accuracy of each invoice.
l. The voucher register is independently reconciled to the control accounts monthly by the originators of the related vouchers.
m. All supporting documentation is marked “paid” by accounts payable immediately prior to making it available to the treasurer.
n. All supporting documentation is required for payment and is made available to the treasurer.
o. The purchasing, receiving, and accounts payable functions are segregated.



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  • CreatedOctober 27, 2014
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