The Soap Manufacturing Company has three employees who work in the warehouse. All of the warehouse workers are authorized to order inventory when it falls below the reorder level. The workers complete a purchase order and mail it to the supplier of

Question

their choice. The inventory is delivered directly to the warehouse. The workers send a memo to accounts payable reporting the receipt of inventory. Accounts payable compares the warehouse memo to the supplier's invoice. Accounts payable prepares a check which the treasurer signs. Describe at least five needed internal control improvements.

Answer 1

The warehouse workers should prepare a purchase requisition and send it to purchasing.
Warehouse workers should make a note that the inventory has been requisitioned to avoid each of the workers requisitioning the same inventory items.
Purchasing should prepare a purchase order.
Purchasing should select a vendor based on price, quality of goods, delivery time, etc.
Inventory should be delivered to the receiving department.
The receiving department should prepare a receiving report.
Accounts payable should receive a copy of the purchase requisition, purchase order, and receiving report and compare these documents to the supplier's invoice.
Cash disbursements should prepare the check.
The supporting documents should be marked "paid" by cash disbursements.