Alyssa Paula C.

Altaya

ACCE 311 (2992)

Operations Audit

Competency- Sample Problem

Fats Foods is a major producer of a wide selection of food products. When the stores department requires items to be purchased, they issue a three-part
prenumbered purchase requisition that needs to be approved by the store’s manager. One copy is sent to the purchasing department, another copy is sent to
the account’s payables department and the last copy is filed in the stores department. Upon receipt of an approved purchase requisition, the purchasing
department issues a five-part pre-numbered purchase order. One copy is sent to the supplier, 2 copies are forwarded to the receiving department, one copy
is forwarded to the accounts payable department and another copy is filed in the purchasing department.
When goods are received, the receiving department just stamps ‘order received’ on its two copies of the purchase order, which then forms its receiving
record. One copy of the receiving record if filed in the receiving department and the other is forwarded to the accounts payable department. The accounts
payable department checks that there is a purchase requisition, purchase order and receiving record for each supplier invoice and then approves it for
payment. The accounts payable department prepares a pre-numbered payment voucher and forward it, along with the supplier’s invoice, purchase
requisition, purchase order and receiving record, to the financial accountant, who signs the payment voucher, completes the payment by bank transfer to the
supplier and returns the supporting documents to the accounts payable department. At the end of the month, the assistant accountant undertakes a
sequence check of all pre-numbered documents. The financial accountant received the monthly bank statement, prepares a bank reconciliation and
investigates any reconciling items.
Required: Identify and briefly explain the weaknesses and deficiencies in the company’s internal control through an Internal Audit Report using the template
provided below. Also, propose action plans or internal control procedures to help them improve their process and reach their objectives.

Summary of Findings:

No Criteria Weaknesses/Deficiencies Level Recommendations Person

. (Low,
Moderate
, High)
No amount or quality is being
advised in which the process
Proper delegation and
controller playing a role just to stamp
1 compelling business High
the Second and third copy blindly.
process.
The possibility of loss is higher as no
amount is verified at this point.
Perception point here, the return of
checked division expands the
Records of vouchers opportunity of duplication payment
receipt should be kept of vouchers against the single
2 Moderate
accordingly especially the receipt, as reports are not kept in
specifications of order. record with a/cs office according to
the process followed in the
organization.
3 It should have a design It is seen that No L2 official High
that is efficient and installment confirmation is in
organized workflow of process.
transactions and have a
proper authorization.
Responsible
It is advisable now that duplicate one should be
shipped off store office that request is according to
order raised by then "The first authentication" and
Receiving
keep authority over PO gave by Purchase
Department
Department, "Second Authentication" over the
amount and quality of the merchandise (goods)
provided by the suppliers.
It is advisable for a future reference reason to keep
the record sent by the A/C payable department to
maintain a strategic distance from the duplication
of payment against a similar provider's receipt, and Purchasing
the store manager validation or cross-check is Department
required if any deficiency is seen charge (debit)
note can be tended to and appropriately payment
voucher can be corrected.
It is prudent to save the organization's impediment Financial/
for payment for level up to Assistant Accountant Assistant
for the level above wherein the detailing Accountant
(reporting) or immediate administrator will
endorse the payment against the requested
 payment voucher. Likewise, require the receiving
clerk to sign the receiving report to show an
acceptance of accountability.

Case 1: Level:
Criteria:
Condition:
Cause Analysis:
Effect:
Recommendation/s: