Major Finding: No reconciliation between contracts/purchase orders / receipts and

invoices of raw materials (important deviation are detected)

Out of 16 PO tested with existing contract, we found 5 where the pricing conditions
did not match with agreed contract. There is not a clear purchasing procedure and
authority matrix.
The receipt of goods are done by the RM WH employee, based on the delivery note
of the supplier. Out of 25 receipts, quantities on 7 PO were different from quantities
delivered
Out of 25 invoices, the pricing conditions differ from the POs ones on 3 invoices, 2 of
them already paid.
Out of 25 receipts, quantities on 2 deliveries were different from quantities invoiced
and paid.
In case of prices or quantities differences, the invoices are not blocked before
reconciliation and are proceed for payment
What is the RISK for the company:

Risk of inconsistency between the stocks recorded in accounting and real

situation

Risk of fraudulent practices by employees

Risk of non-compliance by suppliers

Risk of invoicing and paying more or less than necessary In case of wrong
invoicing the companys expenses are affected and in the case of wrong
paying the cash is affected. Therefore these discrepancies can lead to
differences in financial statements

What could be the action plan to implement?

The company should include in its policies clear statements about the purchases
approval processes, payment approval processes and authorization.
Purchases approval processes.

The decisions about possible purchase orders should be made after the
person in charge ensures that there is a contract signed and other elements
are correct.

When receipts of goods are received the purchase orders are verified

When the invoices are received, they are verified with the receipts of goods
and purchase orders

The people in charge have to verify if the quantity and prices for the goods on the
purchases orders are the same with those on the receipts of goods and invoices.
Usually employee how make the orders should be different from those who receive
receipts of goods and invoices. In other words, there should be a duty splitting.

In case of prices or quantities differences, the invoices should be blocked or

recorded on the special accounts and put in pending till the situation is
clarified and corrected. No payments should be allowed, but the due date
should be taken into consideration

Invoices receive the approval from authorised employees

Payments should be done after all approvals for them are obtained and after the
purchase orders processes are completed