10-39 (Objective 10-5) Anthony, CPA, prepared the flowchart (p. 330) which portrays the raw materials purchasing function of one of Anthonys clients, Medium-Sized Manufacturing Company, from the preparation of initial documents through the vouching of invoices for payment in accounts payable. Assume that all documents are prenumbered.

Required

Identify the deficiencies in internal control that can be determined from the flowchart. Use the methodology discussed in this chapter. Include internal control deficiencies resulting from activities performed or not performed.*

Date Prepared by Approved by MEDIUM-SIZED MANUFACTURING COMPANY FLOWCHART OF RAW MATERIALS PURCHASING FUNCTION MANUFACTURING DIVISION ACCOUNTS PAYABLE STORES PURCHASE OFFICE RECEIVING ROOM CONTROLLER'S DIVISION Purchase requisition Purchase requisition,2 Purchase requisition requisition no Purchase order requisition no Purchase order 3 vendor Purchase Purchase order 4 order 5 purchase order Purchase requisition Purchase requisition vendor Purchase order 3 Purchase order 6 Purchase order 5 Purchasee Purchase order 3 order 4 urchas order Explanatory Notes A. Prepare purchase requisition (3 copies) as needed Receiving report 1 Receiving report 1 B. Prepare purchase Purchase order (6 copies) order 6 Inv C. Attach purchase Req requisition to purchase order vendor D. Merchandise received From vendor Receiving report 1 counted, and receiving report (3 copies) prepared based on count and purchase order Voucher with documents Invoice E. Match purchase order, purchase requisition, receiving report, and invoice. F. Prepare voucher after Receiving report Receiving comparing data on purchase order, invoice, receiving report report 2 Inv G. To cash disbursements in controller's division for payment. Req. = Purchase purchase order requisition P.O. Purchase order Inv. Invoice