discussion

quake

013255271X_ppt_13.pptx

Home >Business & Finance homework help >Accounting homework help >discussion

Chapter 13

The Expenditure Cycle: Purchasing to Cash Disbursements

13-1

The Expenditure Cycle

13-2

The Expenditure Cycle

Activities and information processing related to:

Purchasing and payment of

Goods and services

Primary objective:

Minimize the total cost of acquiring and maintaining inventories, supplies, and the various services the organization needs to function

13-3

Expenditure Cycle Activities

Ordering materials, supplies, and services

Receiving materials, supplies, and services

Approving supplier invoices

Cash disbursements

13-4

Expenditure Cycle General Threats

Inaccurate or invalid master data

Unauthorized disclosure of sensitive information

Loss or destruction of data

Poor performance

13-5

Expenditure Cycle General Controls

Data processing integrity controls

Restriction of access to master data

Review of all changes to master data

13-6

Ordering Threats

Inaccurate inventory records

Purchasing items not needed

Purchasing at inflated prices

Purchasing goods of inferior quality

Unreliable suppliers

Purchasing from unauthorized suppliers

Kickbacks

13-7

Ordering Controls

Perpetual inventory system

Bar coding or RFID tags

Periodic physical counts of inventory

Perpetual inventory system

Review and approval of purchase requisitions

Centralized purchasing function

Price lists

Competitive bidding

Review of purchase orders

Budgets

Purchasing only from approved suppliers

13-8

Receiving Threats

Accepting unordered items

Mistakes in counting

Verifying receipt of services

Theft of inventory

13-9

Receiving Controls

Requiring existence of approved purchase order prior to accepting any delivery

Do not inform receiving employees about quantity ordered

Require receiving employees to sign receiving report

Incentives

Document transfer of goods to inventory

Use of bar-codes and RFID tags

Configuration of the ERP system to flag discrepancies between received and ordered quantities that exceed tolerance threshold for investigation

Segregation of duties: custody of inventory versus receiving

Budgetary controls

Audits

Restriction of physical access to inventory

Documentation of all transfers of inventory between receiving and inventory employees

Periodic physical counts of inventory and reconciliation to recorded quantities

13-10

Approving Invoices Threats

Errors in supplier invoices

Mistakes in posting to accounts payable

13-11

Cash Disbursement Threats

Failure to take advantage of discounts for prompt payment

Paying for items not received

Duplicate payments

Theft of cash

Check alteration

Cash flow problems

13-12

Cash Disbursement Controls

Filing of invoices by due date for discounts

Cash flow budgets

Requiring that all supplier invoices be matched to supporting documents that are acknowledged by both receiving and inventory control

Budgets (for services)

Requiring receipts for travel expenses

Use of corporate credit cards for travel expenses

Requiring a complete voucher package for all payments

Policy to pay only from original copies of supplier invoices

Cancelling all supporting documents when payment is made

13-13

Cash Disbursement Controls

Restriction of access to supplier master file

Limiting the number of employees with ability to create one-time suppliers and to process invoices from one-time suppliers

Running petty cash as an imprest fund

Surprise audits of petty cash fund

Check protection machines

Use of special inks and papers

“Positive pay” arrangements with banks

Cash flow budget

13-14

Chapter 13

The Expenditure Cycle: Purchasing to Cash Disbursements

2012 Pearson Education, Inc. publishing as Prentice Hall