purchasecycle.doc

Purpose Purchasing, receiving, and recording functions are clearly separated. Procedures for initiating purchases and purchase orders are adequate, including leverage of buying power, selection of qualified vendors, competitive bidding, etc (authorization, efficiency). Goods are inspected upon receipt (delivered in quantity and quality specified), and properly recorded via receiving reports (completeness, existence, accuracy). Goods are safeguarded from damage and theft. Inventory, and liability to vendors, is properly recorded (completeness, accuracy). Purchase Orders, Receiving Reports, and Invoices are properly reconciled (completeness, existence, accuracy). The full process is efficient and effective. Scope This audit is financial and operational in nature. Focus will be on, and other entities’ operating and financial processes, specifically Purchasing/Requisition, Inventory Management, and limited Accounts Payable (focusing on P.O. Invoice processing). The testing period will cover 10/1/02 to present. Audit Procedures Perform and document walkthroughs of the following functions: Requisition of Stock Items Transfers between Warehouses Stock Credits Purchase Orders (for stock items, non-stock items, and “X-type” items) Receiving Vendor Credits, Returns and Allowances AP processing of PO and nonPO invoices Process for resolving discrepancies between PO’s and invoices Payment of “Drop Ship” items, focusing on how receipt of goods/service is ensured before payment Through observation and interviews, determine the adequacy of warehouse and receiving security from theft and damage. Through observation of the receiving function, determine the adequacy of routines for ensuring accuracy of quality and quantities received. If receiving clerks use sampling techniques, ensure sample sizes are adequate and samples are selected properly. Obtain an understanding of methods used to determine PAR levels. Determine what inventories exist outside of the Materials