PURCHASING FUNCTION AUDIT

The purchasing department of Travel consists of the following: - A Purchasing manager reporting to the Managing Director - A Purchasing officer reporting to the Purchasing manager - An administrative support supervisor, who reports to the purchasing officer - Two administrative support officers, reporting to the administrative support supervisor

Following the operational audit of the central Purchasing function, 800 purchase orders were reviewed and the following weaknesses were found: - 51 orders were not signed by a purchasing officer - 15 were not authorised by the correct purchasing officer for that product - 12 purchases of goods or services were made with verbal requests from branch travel agent manager and purchase orders were not raised for them - 35 orders have been outstanding for more than 3 months. - 8 additional orders have been raised duplicating orders for good included in those orders outstanding for more than three months - 5 orders were for goods for the personal use of staff but consequently and correctly charged to them

- 2 order sets were missing

In addition to the above, the organisation structure of the Purchasing function was reviewed and found to be ineffective in being able to comply with the basic tenets of internal control.

Tasks required: a. Describe the procedure used in the operational audit that may have discovered each of the above errors of procedure or control. b. In report, you need to include details of the following: I. The identification of the error(s) found II. An analysis outlining the possible consequences of the error from both a corporate governance and ethical requirements perspective III. Review the financial delegations and accountabilities of the current Purchasing Organisation and document the risks found. IV. Develop and document modifications to guidelines/procedures for staff to facilitate organisational compliance with internal control procedures and corporate governance principles. V. Document a modified Purchasing Organisation Chart with any additional details and duties that maybe needed, including correct financial delegations and accountabilities to ensure consistency and compliance with the internal control procedures, corporate governance and ethical requirements, appropriate financial legislation and industry-standard practices in Australia