Question

When Sheryl, the purchasing agent for Cantik Comestics Berhad orders materials, she sends a duplicate copy of the purchase order to the receiving department. When materials are received, Horace, the receiving clerk, records the date of receipt on the copy of the purchase order but does not count the goods received. The same copy of the purchase order is sent to accounting, where Lisa uses it to support the purchase entry in the voucher register. The copy is then sent to the raw materials stores, where William uses it to update the perpetual inventory record.

(i)     TWO (2) internal control weaknesses that exist,
(ii)     the material errors or irregularities that might occur because of each of these     weaknesses
(iii)     your recommendations for improvements in the system

Answer 1

(i)

Two internal control weaknesses that exist.

a) The receiving department does not check the quality and quantity of goods.

b) The raw materials store , which maintains the inventory of goods is making inventory records without counting of the goods.

(ii) Because of these irregularities defective goods can be accepted. The supplier could make of this to supply lesser number of goods. Willams should count the goods before any purchase or sale for inventory records. Else any loss , theft , discrepancy or accouting fault cannot be located. And the workers could misplace the goods.

(iii) the receiving department should be given instructions to count the goods as and when received. And this should be monitored from time to time whether the instruction is being followed or not. The materials store should be asked to do physical counting of goods for making records. If the records are made from the accounts, then accouting records will also get reflected in the inventory records and it would be difficult to trace the mistake .