You have been engaged by the management of Zazandra Sdn. Bhd, a medium sizedmanufacturing company, to study and evaluate its internal control over the purchases andpayments system. You have made the following observations concerning proceduresused by Zazandra.

a. Owing to difficulties in recruiting a Purchasing Manager, the company has

undertaken to handle all purchasing requirements through individual requisitioningdepartments.

b. Goods are received by the Receiving Department together with delivery slipsattached. The department head acknowledges the receipt by signing the deliveryslips.

c. The delivery slips are sent to Storekeeper. The Storekeeper records the details inthe inventory records.

d. The authorized delivery slips are than forwarded to the Accounts Department wherethey are filed in date order.

e. Upon receipt of vendor invoices, the invoices are forwarded to the AccountsDepartment where the prices and extensions are verified.

f. Vendor invoices are forwarded to department heads who have requisitioned thegoods, for their authorization and the resumed to the Accounts Department forpayments.

Required:

a) Briefly describe what techniques you would use to record this system.

b) Why should a company have an independent Purchasing Department?

c) What weaknesses can you identify from your review of the system and the internalcontrol of Zazandra Sdn.Bhd?

d) What errors are likely to result from the control weaknesses you have identifiedabove?

e) Describe two tests of control and two substantive tests for each assertion related tothe facts above that the auditor should perform.