Company: Murray Co

Ordering

Goods or services are obtained by placing a purchase requisition with the centralised purchasing department. Requisitions are sequentially pre- numbered and a weekly sequence check is performed. All requisitions must be authorised by an appropriate manager. On receipt of a purchase requisition, a purchase officer agrees the manager's signature to the signatory list held on file and checks inventory levels where appropriate. Orders are placed with suppliers using sequentially pre-numbered purchase orders. Orders can only be placed with suppliers from the approved supplier list, Suppliers can only be added to the approved suppliers list by the procurement team once the terms of the contract have been agreed, and references obtained. Written confirmation is requested for all orders placed, and the purchase officer agrees the quoted price against the agreed price list and ensures any bulk discounts to which Murray Co is entitled, have been honoured.

Goods receipt

Goods are received into the central warehouse. Goods are inspected for condition and quantity by a warehouse operative, and agreed to the purchase order before the supplier's delivery note is signed to accept the goods. A sequentially pre-numbered goods received note (GRN) is prepared by the warehouse team manager, and grid-stamped. The grid stamp is signed by the warehouse operative to confirm that the goods have been inspected for condition and quantity and agreed to the purchase order. The warehouse manager updates the inventory system on a daily basis from the prepared GRNs. The warehouse manager checks the sequence of purchase orders received on a weekly basis and informs the purchasing department of any missing orders so that they can be followed up.

Invoicing

On receipt of an invoice by the head office accounts team, the invoice is matched to and filed with the relevant GRN, using the purchase order number marked on the invoice (if there is no purchase order number marked on the invoice, this must be obtained from the supplier). The

invoice number is noted on the GRN grid stamp. The invoice is also checked to the original purchase order to ensure the agreed prices and discounts have been honored. A monthly check of GRNs is made by the purchases ledger manager, to identify any GRNs for which no invoice has been received.

Recording transaction

The purchases ledger clerk enters invoices into the system in batches. A batch control sheet is used, which details the number of invoices and the total value. These details are checked to the system batch report. Each invoice is stamped as 'recorded' once the details have been entered onto the system. The purchase ledger manager inspects the file of invoices on a monthly basis to ensure that all invoices have been recorded. Suppliers are required to submit monthly supplier statements, which are reconciled to the supplier's ledger account by the purchases ledger manager. The purchase ledger is reconciled to the purchase ledger Control account on a monthly basis by the purchase ledger manager, and reviewed by the company accountant.

Cash payment

The list of payments is sent to the company accountant, who agrees the details of each payment to the relevant invoice and signs each invoice to authorize payment and evidence the check. The list of payments is signed by the accountant once all invoices have been checked, and sent to the cashier's office for payment. If any individual payment is for more than $25,000 or total payments are for more than $250,000 a second signatory is required. These payments must also be checked and signed by either the financial controller, or finance director. Payments are made by the cashier's office by bank transfer. Invoices are stamped as paid', and returned to the purchases ledger team who record the payment and file the invoices (separately from invoices not yet paid). The purchase ledger manager checks GRNs on a monthly basis to ensure that invoices have been received and paid on a timely basis.

Evaluate the internal control that implement in above situation and indicate the possible error that might occur if the identified control is not implement.