Depict the basic activities performed in Lexsteel's expenditure
cycle. The following additional information supplements that
figure:
- Because of cash flow problems, Lexsteel always pays suppliers
on the last possible day before incurring a penalty for late
payment. Supplier invoices are processed and paid weekly. Every
Friday, the accounts payable clerk reviews and approves all
invoices with a due date the following week
- The purchasing manager reviews and approves all purchases prior
to e-mailing them to suppliers
- After counting and inspecting incoming deliveries, the
receiving clerk enters the following information into the system:
quantities received for each inventory item, date and time
received, and supplier number
- After entering that information, the receiving clerk takes the
inventory to the inventory control department for storage
- Access to the inventory control department is restricted
- Inventory is only released to production when properly
authorized request is received. When the inventory is released, the
inventory control clerk updates the perpetual inventory system
- Physical counts of inventory are taken every three months.
Discrepancies between the counts and recorded quantities on hand
are investigated. Upon resolution of the investigation, the plant
manager authorizes adjustments to the perpetual inventory records
to change them to the amount actually on hand
Required
Identify at least one control weaknesss in
Lexsteel’s expenditure cycle and comment on another weakness
identified by a peer. For each weakness, explain
the threat and suggest how to change the
procedures to mitigate that threat.