The Tyronco Foundation operates worldwide to provide food and medicine to needy individuals in third world countries. Thirteen countries currently receive assistance through the program. The number of individuals that have benefited has increased from 407,000 in 1990 to over 721,000 in 2010. Data for current years is still being tabulated for annual reporting. Contributions are received from foundations, agencies, governments and individuals. Tyronco outsources the marketing and collection processes. The marketing agency publicizes the benefits and collects the donations.

The bylaws require that 75% of the funds collected be distributed to directly benefit the needy (benefit expenses). The administration expenses cannot exceed 25% of contributions. The CEO has recently determined that distribution costs should be reclassified from administrative expense to benefit costs since distribution is a benefit to the needy.

Tyroncos marketing efforts highlight the guaranteed high percent payoff to the needy. The governing agencies of several countries require that the attest auditors include the 75% goal in the financial audit.

Purchasing: The purchasing function is decentralized with a purchasing agent located in each of the 13 countries that qualify for food and non-prescription medicine. The Vice-President of Purchasing at headquarters has requested that the 13 purchasing agents purchase 50% of all items from vendors located in the same country as the recipients. The agents operate somewhat autonomously and can sole-source or utilize competitive bids.

Local purchases are typically 20-30% higher than obtained through a competitive bid process. The CEO supports this approach since he feels that it establishes good relations with local government officials and business people.

Warehouse: The receiving clerks and distribution managers report to the Purchasing Agent. Inventory status reports are issued quarterly to the V.P. of Purchasing who prepares a summary report for the CEO & CFO. The quarterly purchasing reports from the purchasing agents to Headquarters are provided on the following spreadsheet.

Total Vendor Description

The primary headquarters control and review is a comparison of budget to actual. Purchasing Agents are provided with a quarterly budget generally based on demographics of the recipients. Adjustments are made to the budget based on actual contributions received from countries, organizations, foundations, and personal sponsors. The overall increase in purchases has been approximately 13% per year but varied from a low of +7% to a high of +21% between countries.

The summary quarterly reports are approved by the country manager and forwarded to the CFO with the quarterly financial statements for review and approval.

Identify the five major risks in the Purchasing Department. List the controls you would expect to find to mitigate the risks and the audit steps that would be utilized to ascertain that the control mitigates the risk.

Purchasing
	Risk At Risk	Control	COSO Classification	Audit Step
1.	The purchasing function is decentralized with a purchasing agent located in each of the 13 countries that qualify for food and non-prescription medicine	Centralize around regions possibly centered around currency.	monitoring
2.	Local purchases are typically 20-30% higher than obtained through a competitive bid process.	Set controls to review and facilitate local transactions.	Control activities
3.	The agents operate somewhat autonomously and can sole-source or utilize competitive bids.	Establish a Dual control or a sign off control on purchases	Control environment
4.
5.