Anthony Liu, CPA, prepared the flowchart on the next page that portrays the raw materials purchasing function of one of Anthony’s clients, Medium-Sized Manufacturing Company, from the preparation of initial documents through the vouching of invoices for payment in accounts payable. Assume that all documents are prenumbered. 

Required:

Identify the deficiencies in internal control that can be determined from the flowchart. Use the methodology discussed in this chapter. Include internal control deficiencies resulting from activities performed or not performed.

Transcribed Image Text:

Date MEDIUM-SIZED MANUFACTURING COMPANY Prepared by FLOWCHART OF RAW MATERIALS PURCHASING FUNCTION Approved by MANUFACTURING DIVISION ACCOUNTS PAYABLE CONTROLLER'S DIVISION STORES PURCHASE OFFICE RECEIVING ROOM Purchase Purchase requisition requisition 2 Purchase By requisition requisition no. Purchase By requisition order Purchase To no. order vendor Purchase order Purchase order 5 Purchase By purchase order requisition By vendor Purchase requisition Purchase Purchase order 3 order 6 Purchase order Req Reg Purchase By purchase order order Purchase order Receiving reрort Explanatory Notes Receiving Purchase A. Prepare purchase requisition (3 copies) as needed. герогt order 6 Inv. B. Prepare purchase order (6 copies). C. Attach purchase requisition to purchase order. Reg From Receiving By vendor vendor герort D. Merchandise received, counted, and receiving report (3 copies) prepared based on count and purchase order. E. Match purchase order. purchase requisition, receiving report, and invoice. F. Prepare voucher after comparing data on purchase order, invoice, receiving report. Voucher with documents Invoice E Receiving Receiving report 2 героrt G. To cash disbursements in controller's division for P.O. Inv. рауment Req. Req. - Purchase requisition By purchase order PO. - Purchase order Inv. - Invoice