Question

You have completed an audit of activities within the purchasing department of your company. The department employs 30 buyers, seven supervisors, a manager, and clerical personnel. Purchases total about $ 500 million a year. Your audit disclosed the following conditions:
a. The company has no formal rules on conflicts of inter-est. Your analysis produced evidence that one of the 30 buyers in the department owns a substantial interest in a major supplier and that she procures supplies averaging $ 50,000 a year from that supplier. The prices charged by the supplier are competitive.
b. Buyers select proposed sources without submitting the lists of bidders for review. Your tests disclosed no evidence that higher costs were incurred as a result of that practice.
c. Buyers who originate written requests for quotations from suppliers receive the suppliers’ bids directly from the mailroom. In your test of 100 purchases based on competitive bids, you found that in 75 of the 100 cases, the low bidders were awarded the purchase orders.
d. Requests to purchase (requisitions) received in the purchasing department from other departments in the company must be signed by persons authorized to do so. Your examination of 200 such requests disclosed that three, all for small amounts, were not signed properly. The buyer who had issued all three orders honored the requests because he misunderstood the applicable procedure. The clerical personnel charged with reviewing such requests had given them to the buyer in error.

Required
For each of the four conditions, state
a. The risk, if any, incurred if each condition described above is permitted to continue.
b. The control, if any, you would recommend to prevent continuation of the condition described.



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  • CreatedFebruary 26, 2015
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