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As part of your annual audit plan, you will be conducting an audit of the Purchases-Payables cycle. And to effectively plan for the audit, you have to document your understanding of the said process using a flowchart. This is also part of your usual planning procedures which will be expected from you by your Audit Manager.

As a result of your interviews, observations, understanding of the process policies and procedures; you were able to gather the following data:

1. The requests to purchase materials or the Purchase Requisition (PR) are prepared by the Purchasing department which is confirmed by the inventory controllers. These are approved by authorized personnel based on the companys Approval Matrix.
2. After confirmation of the PR, Purchasing Department will prepare the Purchase Orders (PO). These POs do not undergo further approval as long as supported by approved by PRs. A copy of the PO is sent to the vendor and another copy of the same PO to the Receiving personnel.
3. Another copy of the PO is forwarded to the Accounts Payable (AP) department/ group which was also provided a copy of the PR. Upon receipt of the PO, AP department will update PO GL file and AP file by the amount of the expected delivery.
4. Upon receipt of the goods, the Receiving personnel will prepare 4 copies of the Receiving Report (RR) indicating the details of the received goods. The receiving personnel will then compare details of the goods invoices and receiving report to ensure that there are no discrepancies.
5. The second and 3rd copy of the RR is sent to the Storage warehouse and Inventory controllers to match/ confirm PR and RR details, and update their inventory records accordingly.
6. The last copy of the RR is sent to the AP group together with the Invoice to be compared with the PO and update AP file based on the actual received goods.

REQUIREMENT:

1) document your understanding of the said process using a systems flowchart.

2) Indicate three issues you find in the documented process and state some recommendations

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