Financial Systems and Auditing
Test of Control
Purchase Cycle
Objectives of Control
•
Purchase only made when there is a genuine need
•
Value for money is achieved
•
Goods /services delivered is satisfactory
•
Liabilities are recorded completely and accurately
•
Only valid liabilities are paid
•
Liabilities are paid in sensible, commercial
timescale
Purchase cycle
Identity Need
Place Order
Delivery
Invoice
Payment
Authorization
Approved
Supplier /
tender
Check Quantity /
Quality
Authorization
Authorization

5. Exception reporting of
outstanding orders
Purchase Cycle continue
Process Risks Possible Control Procedure
Goods Received
(or service
enjoyed)
Wrong items arrive
Poor quality items

Goods are being
stolen
Goods never arrive
1. Goods logged in on arrival either:
 Directly into system or

Goods received note (sequenced
prepared or
 Supplier’s delivery note
incorporated into system grid
stamped
2. Warehouse staff checked goods against
delivery info and signed if correct
3. Delivery info then passed to Accounts,
as authority to pay associated invoice
4. Goods arrival area are kept secure
5. Deliveries only signed for by warehouse
manager
6. Once goods are checked in inventory
records updated