Management of Tarnawski Ltd. has requested a review of internal controls over cash payments for parts and supplies purchased at its various manufacturing plants. Cash payments are centrally processed at head office based on vouchers prepared and approved at the manufacturing plants. Each manufacturing plant purchases parts and supplies for its own production needs. In response to management’s request, a thorough evaluation of internal controls over payments for plant purchases of parts and supplies is being planned. As a preliminary step in planning the engagement, the plant managers have been asked to provide a written description of their respective plants’ procedures for processing payment vouchers for parts and supplies. The following are nine excerpts from one of the written descriptions.

1. The purchasing department acts on purchase requisitions issued by the stores department (which houses supplies).

2. Orders are placed on pre-numbered purchase order forms.

3. A complete purchase order copy is sent to the receiving department.

4. When goods are received, the receiving department logs the shipment in by stamping “order received” on its purchase order copy and forwards the annotated order to the accounts payable department.

5. Purchase orders, purchase order copies that have been annotated by the receiving department, and supplier invoices are matched by the accounts payable department.

6. Clerical accuracy of supplier invoices is checked by the accounts payable department.

7. A pre-numbered payment voucher is prepared and forwarded, along with supporting documentation, to the plant controller, who reviews and approves the voucher.

8. Supporting documents are returned to the accounts payable department for fi ling and approved payment vouchers are forwarded to head office for payment.

9. A report listing cheques issued by head offi ce is received and promptly fi led by the accounts payable department.

Required

For each of the payment system procedures listed above, state whether it is consistent with good internal control and describe how it strengthens or weakens internal control.