Assignment One The management of Swan Limited, has engaged you to review internal control over purchase, receipt, storage and issue of materials. You have prepared the following comments that describes Swans procedures. Raw materials, which consist mainly of high cost electronic components, are kept in a locked store room. The store room personnel include a supervisor and four clerks. All are well trained, competent and adequately bonded. Raw materials are removed from the storeroom only upon written or oral authorization of one of the production supervisors. There are no perpetual inventory records; hence, the storeroom clerks do not keep records of goods received or issued. To compensate for the lack of perpetual records, a physical inventory count is taken monthly by the store room clerks who are well supervised. Appropriate procedures are followed in making the inventory count. After the physical count, the store room supervisor matches the quantity counted against predetermined reorder levels. If the counts for a given part is below the reorder level, the supervisor enters the part number on materials requisition list and sends this list to the accounts payable clerk. The accounts payable clerk prepares a purchase order for the predetermined reorder quantity for each part and mails the purchase order to the vendor from whom the part was last purchased. When ordered materials arrived at Swan, they are received by the storeroom clerks. The clerks count the merchandise and agree the counts to the shippers bill of lading. All vendors bills of lading are initialed, dated and filed in the storeroom to serve as receiving reports.

Required

Describe the weaknesses in internal control and recommend improvements in Swans procedures for the purchase, receipt, storage and issue of raw materials. Organize your answer sheet into two columns: Weaknesses and recommended Improvements.