Your firm is the external auditor of Bestwood Engineering Ltd which manufactures components for motor vehicles and sells them to motor vehicle manufacturers and wholesalers. It has a turnover of around 20m and a profit before tax of £800 000.

The company has a new financial director who has asked you for advice on controls in the company's purchasing system.

Bestwood Engineering has separate accounts, purchasing and goods received departments. Most purchases are required by the production department but other departments are able to raise requisitions for goods and services. The purchasing department is responsible for obtaining goods and services at the lowest price which is consistent with the required delivery date and quality and for ensuring their prompt delivery.

The accounts department is responsible for obtaining authorization of purchase invoices before they input to the computer which posts them to the purchase ledger and the nominal ledger. The accounting records are kept on a computer and the standard accounting software was obtained from an independent supplier. The accounting software maintains the revenues ledger, the purchase ledger, nominal ledger and payroll. The company does not maintain inven- tories records as it believes the cost of maintaining these records outweighs the benefits. The financial director has explained that services include gas, electricity, telephone repairs and short-term hire of equipment and vehicles.

Required: 

a) Describe the procedures which should be in operation in the purchasing department to control the purchase and receipt of goods.

b) Describe the controls the accounts department should exercise over obtaining authorization of purchase invoices before posting them to the purchase ledger.

c) Explain how controls over the purchase of services, from raising the purchase requisition to posting the invoice to the purchase ledger, might differ from the procedures for the purchase of goods described in your answers to parts

a) and b).