17 terms

Expenditure Cycle Threats and Controls

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
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