Please note that the information provided for unit 2 on Umqhele is an example of a weak control environment and this example contains weaknesses that you have to identify. Ordering function:

1. The factory foreman is responsible for ordering and he will ordered the goods on the last Friday of every month. The factory foreman will draw up a list of everything he needs to order.
2. No requisition is made out as factory foreman feels the list he drew up is sufficient.
3. A single copy of the purchase order containing all the relevant information is then generated by factory foreman for the items ordered. He also signs the purchase order for authorisation. He then sends the purchase order to the supplier only.
4. Umqhele makes use of a range of different suppliers in their area. They usually send their factory foreman to buy materials from the cheapest supplier available

Receiving function:

1. Upon receiving the items, the receiving clerk immediately signs the delivery note (hereafter known as DN) without doing any inspections.
2. The receiving clerk then generates a goods received note (hereafter known as GRN) in duplicate where she indicates the date on which the goods were received and her personal details only.
3. She then signs the GRN and forwards it together with the purchase order and DN to the accounts department.

Recording function:

1. Once the recording clerk receives the invoice from the supplier she will approve it and only check the calculations on the invoice before she records the invoice.
2. As soon as the recording clerk has recorded the invoice in the purchase journal she will throw away the actual invoice as she feels they do not need it anymore.
3. Any disputed invoices will be kept separately and followed up by senior management on a regular basis.

You are required to design a system of internal controls for the purchases cycle of Umqhele (Pty) Ltd. The system of internal controls that you design should mitigate all the weaknesses that are currently present within Umqhele's purchases cycle.