Expenditure Cycle Threats and Controls

Created by erikrh 

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Preventing Stockouts and/or excess inventory

Inventory control systems; perpetual inventory records; barcode and RFID technology; periodic counts of inventory

Ordering unnecessary items

accurate perpetual inventory records; approval of purchase requisitions

purchasing goods at inflated prices

price lists; soliciting competitive bids; use of approved suppliers; approval of purchase orders; budgetary controls

purchasing goods of inferior quality

use of approved vendors; approval of purchase orders; monitoring vendor performance; budgetary controls

purchasing from unauthorized suppliers

approval of purchase orders; restricting access to supplier master file; restrictions on procurement card usage

kickbacks

policies against accepting gifts from vendors; training; job rotations; enforced vacation for purchasing agents; requiring purchasing employees to disclose financial interests in suppliers; supplier audits

receiving unordered goods

requiring receiving dock employees to verify existence of valid purchase order

making errors in counting goods received

using barcode and RFID technology; documenting employee performance; incentives for accurate counts

theft of inventory

physical access controls; periodic counts of inventory and reconciliation of physical counts to records; documenting all transfers of inventory; proper segregation of duties

failing to catch errors in vendor invoices

double-checking invoice accuracy; training of accounts payable staff; using ERS

paying for goods not received

only paying invoices supported by original receiving reports; using ERS; budgetary controls

failing to take available purchase discounts

proper filing; cash flow budgets

paying the same invoice twice

only paying invoices supported by original voucher package; cancellation of voucher package upon payment; using ERS; controlling access to supplier master file

recording and posting errors in accounts payable

various data entry and processing edit controls; periodic reconciliation of accounts payable subsidiary accounts with general ledger

misappropriating cash, checks, or EFTs

restricting access to blank checks, check-signing machine, and EFT transfer terminals; segregation of duties of accounts payable and cashier; reconciliation of bank account by someone independent of cash disbursements process; check protection measures; regular review of EFT transactions

Loss, ateration, or unauthorized disclosure of data

file labels; backup and disaster recovery plans; physical and logical access controls; configuration of ERP systems to enforce proper segregation of duties; encryption; data transmission controls

performing poorly

development and periodic review of appropriate performance reports

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