PLEASE READ QUESTION, EXPERTS HAVE BEEN COPY PASTING ANSWERS WHICH HAS NOTHING TO DO WITH THE QUESTION ASKED. THANKS =)

Task:

Using the narrative description, evaluate Southern Packing Ltds (SPL) purchases, payables and cash payments subsystem. In your evaluation you must:

1. Identify five controls that are in place in SPL and for each one briefly explain:

   • the risk the control is designed to prevent or mitigate

   • whether you believe the control will mitigate the risk

   • how the control mitigates the risk or why it does not mitigate the risk.

Purchases, payables and cash payments subsystem

Southern Packing Ltd (SPL) operates a fruit packing operation in the Bay of Plenty. The pack house packs a variety of fruit including apples, pears and kiwifruit. Fruits are delivered from growers orchards in wooden bins which hold approximately 500 kg of fruit per bin. SPL pack fruit into 20 kg boxes. Southern Packing Ltd purchases the packing boxes and pays all costs associated with the packing process. Packing is charged per filled 20 kg box.

SPL is reviewing their accounting systems and has asked you to evaluate the purchases, payables and cash payments subsystem. SPLs CEO provides you with the following information about the firms systems.

Packing boxes are sourced from five New Zealand suppliers. The boxes need to be ordered three months in advance to guarantee supply on time. Special orders can be placed with several of the suppliers but the cost per box is significantly higher. Orders are placed by the Stores Manager using the packing schedule and the packing box inventory as a basis for estimating how many and when boxes are needed. The Stores Manager creates an electronic purchase order, the CEO reviews the orders and fruit volumes booked into the plant and authorises the purchase orders. Accounts payable access the approved purchase order file and emails a copy of the approved purchase orders to the relevant supplier.

When growers revise their volumes of expected fruit, the Stores Manager reviews the number of packing boxes available. If it appears that more are needed, additional orders are placed by creating additional purchase orders, which follow the same process. All purchases of packing boxes are made on credit. When packing boxes arrive at the pack house the Receiving Manager creates an electronic goods received note; this lists the items and the quantity received.

The Stores Manager regularly reviews the goods received notes and updates the records of the packing boxes on hand. Packing boxes are stored in the pack house store. When packing boxes are needed for packing, staff collect the boxes and place them on the packing line and record the boxes taken on a written stock sheet. The Stores Manager reviews the stock sheets at the end of each day and updates the inventory records for the boxes used. Once recorded the stock sheets are discarded.

SPL also use a variety of consumable supplies for packing, these include blank labels for the packing system, gloves for packers and packing tape. These items are purchased from a variety of suppliers. As the consumables are of low value the Stores Manager is authorised to approve consumables purchase orders. The Stores Manager reviews the consumables available each day and if additional consumables are needed, creates an electronic consumables purchase order and approves it.

Accounts payable regularly review the approved consumables purchase orders and when a new approved order is filed, they email a copy to the relevant supplier. When consumables are received, they are received by the Receiving Manager who gets a staff member to place the items received in the store. The store is open to all staff who collect any consumables when they are needed.

Suppliers invoices are received by accounts payable staff. Invoices for packing boxes are matched to the purchase order and goods received note for packing boxes. Invoices for consumables are matched only to the purchase order. If the documents match, the invoices are listed on an electronic payments list. If the documents dont match, accounts payable staff contact the supplier to identify the error.

Each Friday the payments are accessed by the CEO who reviews the listed payments and documents and approves the payment list. Once approved the accounts payable staff set up payments on the online banking system and authorise these in the online banking system. The CEO then authorises the payments via the banks online banking system for payment to complete the payment process. The approved payments list is printed and filed in a manual file in accounts payable.

Note: SPLs online banking system is set up to require payments to be authorised by two signatories before being actioned by the Bank.