Question 1 For each internal control procedure provided, identify the risk that the procedure is designed to minimize. Risk Internal Control Procedure a. The cores of internal control procedure are checking and balance. And the purchase task needs to follow the procedures because it is related to the subjects internal or external. So, these tasks (purchase order, receiving goods, invoice checking inspection) and treating invoice should be done independently and sequential. a. It is very difficult to find errors because the total amount is correct but the sub-account that is designated by purchase is incorrect. b. It is best way for solution the problem the correct to match the account according to purchaser. c. And, we operate the checking system between the account and the vendor. a. There are three factors for inventories management: ordering cost, carrying cost and shortage cost. b. The person who is responsible of the inventory management tries to do his best to minimize the total costs incurring through as mentioned above cost. c. The manager set up the management schedule through a predetermined amount and a appropriate time. d. Also, the purchase department always must be interested in the situation of the counterpart for perfect purchase. a. After a receiving department have finished to receive the ordered goods, the department must transfer the invoice to funding department. One copy is needed to keep for the receiving department. b. If the company has another department for inspection on purchased goods, a inspection department is responsible of the inspection instead of the receiving department. c. If the receiving department has to do the inspection, it is more effective to separate the person between a receiving task and a inspection task. a. On purchasing product, there are to need at least two steps. First, a product manager signs to demand a purchase order. Second, a general manager confirms to need the purchase. Once, it is determined, it is very difficult to turn back the offer. So, the company needs at least two times steps. a. Product is money. And there can be a lot of frauds in inventory management, especially purchase. Stealing, manipulation of product's amount and kinds, forge receiving and so on. So, it is necessary to use and install the electronic facility such as CCTV for managing products. Any cure is not better than prevention. a. All sales and purchase always have the possibility to occur a return sale and a return purchase. So, whenever it occurs to the transaction like return purchase, the concerned department keeps it recording and transfer the data to the funding department for accurate payment and liquidation. Shipment have been connected with at least two business partners: buyers and sellers ( or adding carrier). And some departments, not one department, on each company are concerned with shipment. So, the shipment is not always correct. So, there is necessary to make a policy about shipment. There are two representative policies: allowed %, and blind PO. The criteria of policy setting up are based on company's internal objective and the relationship with supplier. On adopting allowed 5% policy, the policy gives some room for receiving and inspection for purchase. However, it is not possible these items - fresh goods, danger ones, goods needed large space, and goods difficult to keep. And, sometimes, it is necessary for both parties are to recognize or to be recognized the inspection errors found after shipment under partnership regardless of who's benefit. On adopting blind PO, there is no room for receiving and inspection. The amount shipped must always meet with the amount purchased. The policy is determined by the company's size, the number and kinds of items treated, objectives and partners capabilities and numbers. When the person does not recognize the payment about a certain invoice, he/she can pay one more time. It produces non necessary - additional - task. So, the company prevent the person from paying one more time through the stigma that is recorded payment. Also, unexpected payment can be incurring the problem of cashflow. Once, payment is wrong, it is difficult to meet the balance in actual money. However, it is more difficult to adjust the balance in the accounting system than real system.