You have completed an audit of activities within the Purchasing Department of Zale Company. The department employs thirty buyers, seven supervisors, a manager, and clerical personnel. Purchases total about \(\$ 500\) million a year. Your audit disclosed the following conditions:

1. The company has no formal rules on conflicts of interest. Your analysis produced evidence that one of the thirty buyers in the department owns a substantial interest in a major supplier and that he procures supplies

averaging \(\$ 50,000\) a year from that supplier. The prices charged by the supplier are competitive.
2. Buyers select proposed sources without submitting the lists of bidders for review. Your tests disclosed no evidence that higher costs were incurred as a result of that practice.
3. Buyers who originate written requests for quotations from suppliers receive the suppliers' bids directly from the mail room. In your test of 100 purchases based on competitive bids, you found that, in 75 of the 100 cases, the low bidders were awarded the purchase orders.
4. Requests to purchase (requisitions) received in the Purchasing Department from other departments in the company must be signed by persons authorized to do so. Your examination of 200 such requests disclosed that three, all for small amounts, were not properly signed. The buyer who had issued all three orders honored the requests because he misunderstood the applicable procedure. The clerical personnel charged with reviewing such requests had given them to the buyer in error.
Required:
For each of the four conditions, state

a. The risk, if any, which is incurred if each condition described above is permitted to continue.

b. The control, if any, you would recommend to prevent continuation of the condition described.

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Medium-Sized Manufacturing Company Flowchart of Raw Materials Purchasing Function Tite pand Approved Diy DED