Like many companies, Blitz Soda Company has had to cut costs to survive in the face of strong competition. They brought in consultants from the business advisory group of Stone, Woods LLP, their auditors, who made several recommendations on how to improve efficiency. One change was to eliminate the purchasing department entirely and just have the warehouse manager order raw materials when stocks were low. The system is set up to send the purchase order to whichever vendor the previous purchase order was sent to. Stone Woods said that over the years, the Purchasing Manager had already figured out who would give the best prices so it wasnt necessary to check with other suppliers. Another efficiency was to have two-way documents. Shipping documents and receiving documents were the same form. All were prenumbered and all had a check box to fill in whether the form was for a shipment or for a receipt of goods. Each document was logged into a logbook which also noted if it was for a shipment or a receipt. The warehouse manager reviews the logbook to check if all document numbers were accounted for in sequence. To save processing time and make sure all available discounts were taken, supplier invoices are recorded when received. The supplier invoice date is used. Later, the invoices are matched with the receiving reports and purchase orders. This can take some time as sometimes receiving reports go to the billing clerk and sometimes shipping reports are sent to the payables clerk. This causes confusion, especially when the shipment is for a return of goods. The billing clerk has occasionally recorded this as a sale although the Controller usually passes journal entries to reverse the sale and book it to payables. All payments are authorized by the Controller who checks the supplier invoice with the purchase order and receiving report prior to authorizing payment.

Evaluate the system of controls at Blitz?