Jack's Jungle Fun, Inc is a manufacturer of children's outdoor play equipment. The factory foreman determines when orders for materials are necessary. The orders are sent to the purchasing department that places orders with the vendors recommended by

Question

the factory foreman. When the materials are received, they are delivered directly to a central storeroom without counting what has been received. When invoices are received for the materials purchased, they are sent to the accounting department for payment. The accounting department compares the invoices with purchase orders. If the two documents are in agreement, the invoice is approved for payment. The accounting department prepares the checks that are signed by the company treasurer. Recommend improvements in the company's procedures for purchasing and paying for purchases of materials that will provide better internal control over purchases and payment for those purchases.

Answer 1

Recommended improvements in the company's procedures for purchasing and paying for materials are:

(a) Vendors normally should be determined by the purchasing department rather than the foreman.
(b) All materials should be counted as they are received, and a receiving report should be completed. A copy of the receiving report should be sent to the accounting department.
(c) The invoices should be compared with both the purchases orders and the receiving reports. Also, all extensions and footings on the invoices should be verified.
(d) The checks should be prepared in the treasurer's department, with the treasurer or other designated employees assigned the responsibility of signing checks.