Identify and explain EIGHT deficiencies in Yangtze Co 's purchases and payables system and provide a control recommendation to address each of these deficiencies .

This scenario relates to following requirements:

It is 1 July 20X5 .You are an audit manager with Rhine & Co and you are in the process of reviewing the audit plan and documentation describing Yangtze Co's purchases and payables system in preparation for the interim and final audit for the year ending 31 August 20X5 .The company is listed on the stock exchange in the jurisdiction in which it operates.It manufactures electrical products in five large factories .In addition there is a head office and several warehouses .Yangtze Co has an established internal audit department which undertakes operational reviews .

Below is an extract of the purchases and payables system :

-Ordering of materials: The company has a purchase ordering department based at its head office .At each factory , production supervisors review job scheduling reports .If raw materials are required , a requisition form is completed which is authorized by the production director and then submitted to the purchase ordering department .The requisition form contains details of the materials required but does not record current inventory levels.

On receipt of the purchase requisition , staff in the purchase ordering department raise sequentially numbered .three - part purchase orders based on the approved suppliers listing .The listing is regularly updated .The purchasing director authorises purchase orders over $5,000. One copy of the order remains with the purchase ordering department , the second copy is sent to the finance department and the third copy is sent to the supplier.

- Receipt of goods: from suppliers are processed bywarehouse staff who check the quantity and quality of the goods to the supplier dispatch note and complete sequentially numbered goods received note ( GRN ) On a daily basis the GRNs are sent to the finance department.

-Purchase invoices: When purchase invoices are received they are stored ina manual folder while awaiting matching The accounts clerk matches purchase invoices to purchase orders and GRNs and all three documents are sent for authorization to the appropriate individual .Once authorized an accounts clerk gives each invoice a unique number based on the supplier code . The purchase invoices are then logged into the purchase day book by utilizing existence check application controls.

-Payment and recording: The total on the payables ledger is not compared to the control account in the general ledger as the accounts clerk believes this process is unnecessary .In order to maximize cash balances .purchase invoices are paid 90 days after receipt of the invoice. On a weekly basis , a bank payments list is generated for supplier payment. The finance director reviews the total amount of the bank payments list which she authorises and then processes it for payment .