The following scenario relates to questions 1 – 5
You are an audit manager in the internal audit department of SME Co, a listed retail company. The internal audit department is auditing the company’s procurement system. The system operates as follows:
SME’s ordering department consists of six members of staff: one chief buyer and five purchasing clerks.
All orders are raised on pre-numbered purchase requisition forms, and are sent to the ordering department.
In the ordering department, each requisition form is approved and signed by the chief buyer. A purchasing clerk transfers the order information onto an order form and identifies the appropriate supplier for the goods.
Part one of the two-part order form is sent to the supplier and part two to the accounts department. The requisition is thrown away.
When goods are received, the goods inwards department immediately raises a two-part pre numbered goods received note (GRN).
- Part one is sent to the ordering department, which then forwards the GRN to the accounts department.
- Part two is filed in order of the reference number for the goods being ordered (obtained from the supplier’s goods dispatched documentation), in the goods inwards department.
SME Co’s management is concerned that a number of inefficiencies in the procurement system may be having a negative financial impact on the company. As a result, they have requested the internal audit department to carry out a value for money audit focused on the company’s procurement practices.
1. Which of the following is NOT a likely effect of the deficiencies in the internal control system for ordering described above?