The accounting and control procedures relating to purchases of materials by the Cavallero Company, a medium-sized concern that manufactures special machinery to order, have been described by your junior accountant in the attached narratives.

REQUIRED: (1) Identify the weaknesses, if any, in the internal control of Cavalleros purchasing and related procedures in the following areas.

(a) Requisition of materials.

(b) Receipt and storage of materials.

(c) Functions of the Purchasing Department.

(d) Functions of the Accounting Department.

(2) For the weaknesses identified in (1) above, provide an additional or revised procedure that could be used to eliminate the weakness.

(1) After approval by the Manufacturing Department Foremen, material purchase requisitions are forwarded to the Purchasing Department Supervisor, who distributes such requisitions to the several employees under his control. The latter employees prepare prenumbered purchase orders in triplicate, account for all numbers, and send the original purchase order to the vendor. One copy of the purchase order is sent to the Receiving Department, where it is used as a receiving report. The other copy is filed in the Purchasing Department.

(2) When the materials are received, they are moved directly to the storeroom and issued to the foremen on informal requests. The Receiving Department sends a receiving report (with its copy of the purchase order attached) to the Purchasing Department and sends copies of the receiving report to the Storeroom and to the Accounting Department.

(3) Vendors invoices for material purchases, received in duplicate in the Mailroom, are sent to the Purchasing Department and directed to the employee who placed the related order. The employee then compares the invoice with the copy of the purchase order on file in the Purchasing Department for price and terms, and compares the invoice quantity with the quantity received as reported by the ReceivingDepartment on its copy of the purchase order. The Purchasing Department employee also checks discounts, footings, and extensions, and initials the invoice to indicate approval for payment. The invoice is then sent to the Voucher Section of the Accounting Department, where it is coded for account distribution, assigned a voucher number, entered in the Voucher Register, and filed according to payment date.

(4) On payment dates, prenumbered checks are requisitioned by the Voucher Section (Accounts Payable Department) from the cashier and prepared except for signature. After the checks are prepared, they are returned to the cashier, who puts them through a check signing machine, accounts for the sequence of numbers, and passes them to the Cash Disbursements bookkeeper then returns the checks to the Voucher Section, which then notes payment dates in the Voucher Register, places the checks in envelopes, and sends them to the Mailroom. The vouchers are then filed in numerical sequence. At the end of each month, one of the voucher clerks prepares an adding machine tape of unpaid items in the Voucher Register, compares the total with the general ledger balance, and investigates any difference disclosed by such comparison.