Case Study-2 Last year the AMS Manufacturing Company purchased over $10 million worth of office equipment under its "special ordering system, with individual orders ranging from $5,000 to $30,000. Special orders are for low-volume items that have been included in a department manager's budget. The budget, which limits the types and dollar amounts of office equipment a department head can requisition, is approved at the beginning of the year by the board of directors. The special ordering system functions as follows A purchase requisition form is prepared and sent to the purchasing department. Upon receiving a purchase requisition, one of the five purchasing agents (buyers) verifies that the requester is indeed a department head. The buyer next selects the appropriate supplier by searching the various catalogs on file. The buyer then phones the supplier, requests a price quote, and places a verbal order. A pre-numbered purchase order is processed with the original sent to the supplier and copies to the department head, receiving and accounts payable. One copy is also filed in the open-soquisition file. When the receiving department verbally informs the buyer that the item has been received, the purchase order is transferred from the open to the filled file. Once a month, the buyer reviews the unfilled file to follow up on open orders The receiving department gets a copy of each purchase order. When cquipment is received that copy of the purchase order is stamped with the date and, if applicable any differences between the quantity ordered and the quantity received are noted in red ink. The receiving clerk then forwards the stamped purchase order and equipment to the requisitioning department hcad and verbally notifies the purchasing department that the goods were received Upon receipt of a purchase order, the accounts payable clerk files it in the open purchase order file. When a vendor invoice is received, it is matched with the applicable purchase order, and a payable is created by debiting the requisitioning department's equipment account. Unpaid invoices are filed by due date. On the due date, a check is prepared and forwarded to the treasurer for signature. The invoice and purchase order are then filed by purchase order number in the paid invoice file. Checks received daily from the accounts payable department are sorted into two groups: those over and those under $10,000. Checks for less than $10,000 are machine signed. The cashier maintains the check signature machine's key and signature plate and monitors its use. Both the cashier and the treasurer sign all checks over $10,000 a). Below is a list of activities under spend. The process was defined as follows: 1) Expenses: Purchase of $ 10 million in office equipment from various products ranging from $5,000 to $ 30,000 The department head sends the purchase request to the procurement department. 2) After receiving the purchase order, the requisition purchasing department checks the availability of the product with the suppliers and asks them to provide the price for the ordered quantity 3) After setting the prices, the purchasing department analyzes the offered purchase price range and the quality of the products and places the order verbally. 4) After placing the order, the supplier provides a copy of the purchase order which is also sent to the department head. 5) After that, the order is received by the receiving department where a quality test and inspection is performed 6) At a later time the delivered products are delivered to the stores where the required department takes the Required quantity for it's operations. b. Identify five risks associated with the five activities identified on a. (5
