Jason Scott, an internal auditor for Northwest Industries, is auditing Springer's Lumber & Supply, Northwest's building materials outlet in Bozeman, Montana. His supervisor, Maria Pilier, asked him to trace a sample of purchase transactions from purchase requisition to cash disbursement to verify that proper control procedures were followed. Jason is frustrated with this task, and for good reasons:

The purchasing system is poorly documented. He keeps finding transactions that have not been processed as Ed Yates, the accounts payable manager, said they should be$.$

Purchase requisitions are missing for several items personally authorized by Bill Springer, the purchasing vice president. Some vendor invoices have been paid without supporting documents, such as purchase orders and receiving reports. Prices for some items seem unusually high, and there are a few discrepancies in item prices between the vendor invoice and the corresponding purchase order.

Yates had a logical answer for every question Jason raised and advised Jason that the real world is not as tidy as the world portrayed in college textbooks. Maria also has some concerns:

Springer's is the largest supplier in the area and has a near monopoly. Management authority is held by the company president, Joe Springer, and his two sons, Bill $($the purchasing vice president$)$ and Ted $($the controller$).$ Several relatives and friends are on the payroll. Together, the Springers own $10\%$ of the company. Lines of authority and responsibility within the company are loosely defined and confusing. Maria believes that Ted Springer may have engaged in "creative accounting" to make Springer's one of Northwest's best$-$performing retail outlets.

Respond to the following issues:

Because Ed Yates had a logical explanation for every unusual transaction, should Jason describe these transactions in his report?

Is a violation of control procedures acceptable if management has authorized it$?$

Maria's concerns about Springer's loosely defined lines of authority and possible use of

Answer rating: 100% (QA)

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