Question

An organization has a goal to prevent the ordering of inventory quantities in excess of its needs. One individual in the organization wants to design a control that requires a review of all purchase requisitions by a supervisor in the user department prior to submitting them to the purchasing department. Another individual wants to institute a policy requiring agreement of the receiving report and packing slip before storage of new inventory receipts. Which of these controls is (are) relevant in achieving the stated goal? Explain your answer.

Answer 1

The pertinent control is "review of all purchase requisitions by a supervisor in the user department before to passing them to the purchasing department" this control would make sure, that the company would only procure inventory if they are previously in need of them. "a policy necessitating agreement of the getting report and packing slip before storage of new inventory receipts" is not pertinent in attaining the goal, since this policy only guarantee the physical security of inventory, however this doesn't help in reducing unnecessary inventory.

The control needing a analysis of all purchase requisitions by a supervisor in the user department prior to surrender them to the purchasing department is greater because it is a means of control over the number of items ordered. Equally, the control necessitating agreement of the receiving report and packing slip would be more suitable for the risk of receiving an amount other than that ordered.