Because of cash flow problems, the company always pays suppliers on the last possible day before incurring a penalty for late payment.
The figure below depicts the basic activities performed in ACME Incorporated’s expenditure cycle.
ACME EXPENDITURE CYCLE PROCEDURES
The table showing the company’s expenditure cycle procedures appears as follows:
|
Employee |
Activity Performed (sequential, left-to-right across all rows) |
|
Production Control |
Issue Bill of Materials for purchasing |
|
Purchasing |
Order Inventory |
|
Receiving Clerk |
Receive and Count Inventory |
|
Inventory Control |
Store Inventory |
|
Accounts Payable |
Receive Invoice from Supplier, Use P.O. and Receiving Report to Approve Invoice and Update A/P on the basis of information received from purchasing and receiving clerk |
|
Treasurer |
Make EFT Payment to Supplier, Receive and Reconcile Bank Statement |
The following additional information supplements the figure:
- Because of cash flow problems, the company always pays suppliers on the last possible day before incurring a penalty for late payment. Supplier invoices are processed and paid weekly. Every Friday, the accounts payable clerk reviews and approves all invoices with a due date the following week.
- The purchasing manager reviews and approves all purchases prior to e-mailing them to suppliers.
- After counting and inspecting incoming deliveries, the receiving clerk enters the following information into the system:
- Quantities received for each inventory item
- Date and time received
- Supplier number
- After entering that information, the receiving clerk takes the inventory to the inventory control department for storage.
- Access to the inventory control department is restricted.
- Inventory is only released to production when a properly authorized request is received. When the inventory is released, the inventory control clerk updates the perpetual inventory system.
- Physical counts of inventory are taken every three months. Discrepancies between the counts and recorded quantities on hand are investigated. Upon resolution of the investigation, the plant manager authorizes adjustments to the perpetual inventory records to change them to the amount actually on hand.
REQUIRED
Identify at least three control weaknesses in ACME’s expenditure cycle. For each weakness, explain the threat and suggest how to change the procedures to mitigate that threat. Submit your assessment of the controls as a Word or pdf document here by the due date. Use full sentences. Paragraphs and/or bullet points are acceptable. Put your name and REDID at the top of the document you submit.
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