Chapter 9 THE ACQUISITION CYCLE— PURCHASING AND RECEIVING

Overview of the Purchasing and Receiving Functions Documenting the process: Identification of events Annotated narrative Workflow table Overview and detailed activity diagrams Documenting data design: Events and tables used UML class diagram Record layouts

Overview of the Purchasing and Receiving Functions Risks and controls in purchasing and receiving: Execution risks Recording risks Controls over purchasing and receiving

Overview of the Purchasing and Receiving Functions Risks and controls in purchasing and receiving: Types of workflow controls Segregation of duties Use of information from prior events Required sequence of events Follow-up on events

Overview of the Purchasing and Receiving Functions Risks and controls in purchasing and receiving: Types of workflow controls Sequence of prenumbered documents Recording of internal agents accountable for an event Limitation of access to assets and information Reconciliation of records with physical evidence

Overview of the Purchasing and Receiving Functions Risks and controls in purchasing and receiving: Types of input controls Establish a primary key Use drop-down or look-up menus Scan data Check record for consistency with that entered in a related table Confirm entered data by comparing with another table

Overview of the Purchasing and Receiving Functions Risks and controls in purchasing and receiving: Types of input controls Use referential integrity controls Format checks to limit data entered Rely on validation rules to limit the data that can be entered Use defaults from data entered in prior sessions

Overview of the Purchasing and Receiving Functions Risks and controls in purchasing and receiving: Types of input controls Prohibit leaving a field blank Use computer-generated values for records Prompt users to accept/reject data Compare batch control totals before data entry to printouts after data entry

Overview of the Purchasing and Receiving Functions Risks and controls in purchasing and receiving: Types of input controls Review edit report for errors before posting Examine exception reports listing overrides of defaults or entry of unusual values

Overview of the Purchasing and Receiving Functions Application menu for purchasing and receiving: Maintain supplier, inventory, or employee Record requisition, purchase order, or receipt Display/print reports Query Exit

Using Accounting Applications: Purchasing and Receiving Supplier table maintenance: Data entry screen and record layout Using supplier file maintenance to control execution risk Unauthorized goods or services received: purchase was from wrong supplier Wrong quantity, quality, or price

Using Accounting Applications: Purchasing and Receiving Supplier table maintenance: Using supplier file maintenance to control recording risks and improve recording efficiency Wrong external or internal agent recorded Efficiency Controls over supplier maintenance

Using Accounting Applications: Purchasing and Receiving Inventory table maintenance: Data entry screen and record layout Using inventory file maintenance to control execution risk Wrong type of product or service received Wrong quantity, quality, or price

Using Accounting Applications: Purchasing and Receiving Inventory table maintenance: Using inventory file maintenance to control recording risks and improve recording efficiency Wrong type of product or service recorded Wrong quantity or price recorded Efficiency Controls over inventory maintenance

Accounting Applications and Controls: Recording Data in Transaction Tables Record requisition: Data entry screen and record layout Requisitions and recording risks Recorded a requisition that never occurred Requisition not recorded at all, recorded late, or unintentionally duplicated

Accounting Applications and Controls: Recording Data in Transaction Tables Record requisition: Requisitions and recording risks Errors in recording data items - Wrong: Product or service; Quantity or price; Supplier, requestor, or supervisor; Recording other data stored in event records Additional controls Requisitions and execution risks

Accounting Applications and Controls: Recording Data in Transaction Tables Prepare purchase order (PO): Data entry screen and record layout Purchase orders and recording risks Recorded PO that never (should have) occurred PO not recorded at all, recorded late, or unintentionally duplicated PO data items not accurate Purchase orders and execution risks

Accounting Applications and Controls: Recording Data in Transaction Tables Receive goods: Data entry screen and record layout Receiving and execution risks Wrong type or product or service received Wrong quantity, quality, or price Receiving and loss of assets Receiving and input controls

Accounting Applications and Controls: Recording Data in Transaction Tables Additional comments: Matching controls with risk in the purchasing and receiving processes Acquisition of services

K E Y T E R M S Purchase order Purchase requisition