Question

Within the client’s IT system, supplier information is contained in a supplier master file (SMF). Each...

Within the client’s IT system, supplier information is contained in a supplier master file (SMF). Each supplier has a unique supplier code. If the purchasing clerk attempts to place an order from a supplier not in the SMF, the order can not be processed.

Required:
Explain what type of control the above information describes. Discuss the control’s strengths and weaknesses.
Business   Accounting   
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Answer #1

The control described herein is a Preventive control. The purpose of building this control is to ensure that fraud does not take place.

The below could be described as this control's strength's and weaknesses :

Strenghts :

- Prevents farund by ensuring that purchases are being made from authorised vendors only.

- It ensures that payments are being made to correct supplier.

- It has depository of relevant data of vendor like communication data , tax data etc.

Weakness :

- In correct infomation in the file may lead to faliure of this control.

- Dummy or duplicate vendor entries may lead to payment being transmitted to wrong persons.

- It may happen that orders are placed to wrong vendor by making unauthorised entries in the file.

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