Question)

Required: By reading the information provided below, make an assessment of Control Risk at Oceanic Airlines for the purchasing process. Classify these weaknesses as eitherlow (1-2 control weaknesses), medium (3-5 control weaknesses) or high (6+ control weaknesses).

"Purchasing process at Oceanic Airlines (OA).

The inventory system for Oceanic Airlines (OA) uses algorithms to generate Purchase Orders for regular supplies such as cleaning products, napkins, paper cups etc based on Economic Order Quantities (EOQs). These quantities are within strict rules determined by the Purchasing Department. For example, there are maximum order limits. Prices for these orders are determined by long term contracts signed with the supplier and include price increases every 6 months.

Purchase Orders made as a result of the EOQ system do not require approval.

For items OA needs outside of the EOQ system (such as in-flight food, office stationery, additional uniforms) - a Purchase Request must be made by the relevant department (such as Catering, Head Office, Human Resources) and emailed to the UTS 22522 Assurance Services and Audit - Autumn 2020 - Final Exam - for student distribution Page 3 Dr Amanda White and University of Technology Sydney 2020 Purchasing Department. A Purchasing Officer will review the request to determine if it is reasonable. If it is reasonable, they prepare a Purchase Order. Purchase Orders are reviewed by the Purchase Manager before being emailed to a pre-approved supplier. The approval is noted in an email to the Purchasing Officer and the department that made the Purchase Request. Purchase Orders are sent by email and the Accounting Department is cc'd on this email.

All goods are delivered to OA's warehouse in Botany, NSW (near the airport). A receiving report is completed manually by warehouse staff. A copy is kept with the warehouse while the original is sent to the Accounting Department by internal mail.

Invoices are sent by suppliers directly to OA's Accounting Department. An Accounts Clerk takes all invoices received each day and attempts to find the relevant Purchase Order and Receiving Report. Once all three documents are obtained, the Clerk conducts a 3-way match. Once matched, an electronic funds transfer is prepared. The Financial Controller reviews all of the supporting documentation to ensure that there is a 3-way match before signing each set of documents and entering their approval code to the online banking website to make the payments."