During the audit of Fashion Street Ltd, Jeannette was tasked to audit the purchase and

payment section of the company. Jeannette interviewed the accountant and obtained an

understanding of the following purchasing and payment processes of the company:

Purchases

Whenever a department is running low on inventory, the department staff will raise and

approve a purchase requisition form. These forms will then be used to raise a randomly

numbered purchase order by the purchasing manager. A copy of each purchase order is sent

to the accounting department and the requesting department, respectively.

When the goods are delivered to the warehouse, the department staff will check on the goods

received based on the copy of the purchase order. When the department staff confirmed that

the items are in order, a sequentially pre-numbered goods received note (GRN) is generated

by the warehouse personnel and sent to the accounting department.

Payments

When the supplier's invoice is received by the accounting department, the accounts

executive will match the invoice to the respective GRN before preparing the cheque

payment. The accountant will then approve the cheque payment and send it out himself at

the end of the day.

Required:

With regards to the controls exercised over the purchases and payables system of Fashion

Street Ltd:

(a) Identify and explain any FOUR (4) control weaknesses in Fashion Street Ltd's

purchases and payment process.

(b) For each of the control weaknesses identified in (a) above, provide a recommendation

to improve on the weakness.

(You should use a TWO (2) column format using the headings 'Weakness' and

'Recommendation'.)

(c) Discuss FIVE (5) objectives of internal controls that should be exercised over a

purchases and payables system.