Question

Sally works in the accounts payable area of Timeless and is responsible for payments to suppliers. At present, she undertakes a three way matching process before any invoices can be paid, but she finds this process time consuming and wants to move to matching just the receiving report and the supplier invoice. You have advised her that this would be an internal control issue as comparing quantities on a vendor invoice to quantities on the receiving report would not
prevent or detect which of the following situations?

	a.	update of wrong inventory items due to data entry error
	b.	order for an excessive quantity of inventory
	c.	theft of inventory by receiving department employees
	d.	receiving and accepting inventory not ordered

Answer 1

Answer: Option d. receiving and accepting inventory not ordered

The three way matching process helps ensure that the goods ordered (per the purchase order) is received (per the receiving report) and has been invoiced for by the supplier (per the supplier’s invoice).

Matching just the receiving report with the supplier’s invoice will ensure that the goods invoiced for have been received but since it is not matched with the purchase order it will not detect any goods that are received and invoiced but which had not been ordered in the purchase order. Hence, option d. is the correct answer.