Your firm is the external auditor of TangleWeb Ltd, which manufactures electrical devices for the airline industry. You have been asked to give advice on the internal controls that should be in place to control payments to suppliers arising from the purchase of components.

The purchase process has five distinct phases: (1) the inventory system flags when new stock is needed and automatically raises a purchase request, (2) the purchasing department place orders with suppliers, (3) the goods are received in the warehouse, (4) the purchase invoices are received by the finance department, (5) the finance department arranges payment of approved invoices.

Required

a. Describe the procedures that should be in operation in the purchasing department to control the purchase orders and in the warehouse to control receipt of goods.

b. Describe the controls the finance department should exercise over obtaining authorisation of purchase invoices before posting them to the accounts payable ledger.