Your review and analysis of the purchasing process revealed the following significant control weaknesses, as well as some inefficiency:

Required:

Provide recommended changes to the process that would strengthen the control and overall cost-effectiveness of the controls.

Control Weakness and potential impact:

1. Purchase requisition authorizing signatures are not verified by purchasing clerk or manager. there is not check that the person signing has a high enough level of authority. Unauthorized purchase commitments may arise.

2. Purchase requisitions are not prenumbered. The clerk should assign the same number, allowing a false order to be processed.

3. Buyers have the discretion to select suppliers for purchases of up to $25,000, or even if the buyer claims the bidding process is too costly.

-Buyers (Purchasing dept) could split up orders to come in less than $25,000 to allow discretion not to choose from a pre-qualified supplier list.

- Buyers (Purchasing dept.) could collude with one supplier, favour them over other suppliers, and receive kickback from this arrangement.

4. Purchaisg Manager sends PO back to buyer who delivers it to suppliers.

- Buyer can alter PO beofre it is delivered, and arrange for extra goods to be ordered that the buyer would keep when they arrive. The buyer could cover up by telling the use group the extras over what they put on their PR were an over shipment that the buyer has agreed to "ship back" to the supplier. The BL and PO will match and ger recorded into accounts payable and ultimately paying too much for the goods it actually needed and received

- This weakness can also facilitate collusion as the buyer is delivering the PO to the supplier.

Recommended Action to improve control:

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