Question

Complete the planning template on the following page by identifying process objectives, risks, and mitigating controls for the payments process. For each control identified, label the control as either “partner authority/action”, “access control”, or “application control”. You may have more than one risk associated with an intention, and you may have more than one control associated with a risk. At least three different risks.

The Purchase Process

ABC organization’s budget for purchases of equipment and supplies is about $50 million annually.

Pamela Ryder is in charge of the Purchasing Department. She reports directly to the Vice President of Finance for ABC. Pam supervises four purchasing clerks and three receiving personnel. The office is responsible for purchases of all supplies and equipment except for computer equipment and software and plant purchases or additions.

The Payment Process

The various departments across the organization complete purchase requisition forms online when there is a need for equipment/supplies. Manager approval is required for any purchase requisition greater than $10,000. These online forms are then forwarded to the Purchasing Department. If the request is for computer equipment or software, the requisition is forwarded to the Department of Information Technology for action.

Purchase requisitions are assigned to one of the three purchasing clerks by department. For example, one purchasing clerk makes purchases for all departments beginning with the letters A – H. Purchasing clerks check the requisition to make sure it is authorized and then consult the Approved Vendor Listing to find a supplier. The clerk may contact a supplier for pricing and product specification. Only vendors on the Approved Vendor Listing may be utilized unless an additional approval is obtained from Ms. Ryder. Once this task is complete, the purchasing clerk enters the purchase requisition and vendor and price information into the computer system, which creates a multiple part purchase order. Clerks send copies of the purchase order to Central Receiving, to the vendor, and to the Accounts Payable Department.  

When Central Receiving receives an order, a receiving clerk consults the Purchase Order file to make sure the correct product and quantity have been delivered. The clerk also checks the product for damage. Damaged products are returns to suppliers. Central Receiving does not accept any over shipments. Receiving clerks will scan the item into the inventory system upon receipt. Receiving clerks then forward accepted shipments to the adjacent warehouse for distribution to the appropriate department. The system will specify where the items are to be sent based on the department listed on the purchase order.    Clerks file one copy of the Receiving Report, send one copy to the Purchasing Department, and forward a third copy to Accounts Payable.  

Greg Wiley is the Supervisor of Accounts Payable. Two accounting clerks report to him. He assigns invoices to them for payment based on vendor name. One clerk processes payments for vendors A-M, and the other clerk handles payments to all vendors with names beginning with letters N-Z. The clerks match each vendor invoice with a copy of the receiving report and purchase order before entering it into the computer for payment by due date. There are often discrepancies among the three documents. This requires frequent phone calls to the vendor, the Receiving Department, or Purchasing for resolution. As a result, the organization frequently makes payments late and loses out on cash discounts. Once discrepancies are resolved and all three documents match, the system will automatically generate the payment amount based on the amount in the resolved matching documents.  

Answer 1

Purchase Process

Objective:-

1 Purchase of right quality.

2 Purchase of right quantity.

3 Purchase at right price.

4 Purchase at right time.

5 Purchase from right source.

Risk:-

1. Unauthorised orders for material and supplies.

2 Goods purchase will not meet quality standards.

3 Not receiving goods at time of production need.

4 Duplicate order received.

Payment Controls

1 Action- Train employees relating to payment process that how directly or indirectly impact payment risk exposure

2 Access Control- Only the authorised executive should be allowed for handling payment portal.

3 Application control- There should be Authenticated Mechanism involved.