Chapter 9
THE ACQUISITION
CYCLE—
PURCHASING AND
RECEIVING
Overview of the
Purchasing and
Receiving Functions
Documenting the process:
 Identification of events
 Annotated narrative
 Workflow table
 Overview and detailed
activity diagrams
Documenting data design:
 Events and tables used
 UML class diagram
 Record layouts
Overview of the
Purchasing and
Receiving Functions
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Risks and controls in
purchasing and receiving:
Execution risks
Recording risks
Controls over purchasing
and receiving
Overview of the
Purchasing and
Receiving Functions

Risks and controls in
purchasing and receiving:
Types of workflow controls
 Segregation of duties
 Use of information from
prior events
 Required sequence of
events
 Follow-up on events
Overview of the
Purchasing and
Receiving Functions
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Risks and controls in
purchasing and receiving:
Types of workflow controls
 Sequence of
prenumbered documents
 Recording of internal
agents accountable for
an event
 Limitation of access to
assets and information
 Reconciliation of records
with physical evidence
Overview of the
Purchasing and
Receiving Functions

Risks and controls in
purchasing and receiving:
Types of input controls
 Establish a primary key
 Use drop-down or look-up
menus
 Scan data
 Check record for
consistency with that
entered in a related table
 Confirm entered data by
comparing with another
table
Overview of the
Purchasing and
Receiving Functions

Risks and controls in
purchasing and receiving:
Types of input controls
 Use referential integrity
controls
 Format checks to limit
data entered
 Rely on validation rules
to limit the data that
can be entered
 Use defaults from data
entered in prior sessions
Overview of the
Purchasing and
Receiving Functions

Risks and controls in
purchasing and receiving:
Types of input controls
 Prohibit leaving a field
blank
 Use computer-generated
values for records
 Prompt users to
accept/reject data
 Compare batch control
totals before data entry to
printouts after data entry
Overview of the
Purchasing and
Receiving Functions

Risks and controls in
purchasing and receiving:
Types of input controls
 Review edit report for
errors before posting
 Examine exception
reports listing overrides
of defaults or entry of
unusual values
Overview of the
Purchasing and
Receiving Functions
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Application menu for
purchasing and receiving:
Maintain supplier,
inventory, or employee
Record requisition,
purchase order, or receipt
Display/print reports
Query
Exit
Using Accounting
Applications:
Purchasing and
Receiving
Supplier table maintenance:
 Data entry screen and
record layout
 Using supplier file
maintenance to control
execution risk
 Unauthorized goods or
services received:
purchase was from wrong
supplier
 Wrong quantity, quality,
or price
Using Accounting
Applications:
Purchasing and
Receiving
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Supplier table
maintenance:
Using supplier file
maintenance to control
recording risks and
improve recording
efficiency
 Wrong external or
internal agent recorded
 Efficiency
Controls over supplier
maintenance
Using Accounting
Applications:
Purchasing and
Receiving
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Inventory table
maintenance:
Data entry screen and
record layout
Using inventory file
maintenance to control
execution risk
 Wrong type of product
or service received
 Wrong quantity, quality,
or price
Using Accounting
Applications:
Purchasing and
Receiving
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Inventory table
maintenance:
Using inventory file
maintenance to control
recording risks and improve
recording efficiency
 Wrong type of product or
service recorded
 Wrong quantity or price
recorded
 Efficiency
Controls over inventory
maintenance
Accounting Applications
and Controls:
Recording Data in
Transaction Tables
Record requisition:
 Data entry screen and
record layout
 Requisitions and recording
risks
 Recorded a requisition
that never occurred
 Requisition not recorded
at all, recorded late, or
unintentionally
duplicated
Accounting Applications
and Controls:
Recording Data in
Transaction Tables
Record requisition:
 Requisitions and
recording risks
 Errors in recording data
items - Wrong:
 Product or service;
 Quantity or price;
 Supplier, requestor,
or supervisor;
 Recording other data
stored in event
records
 Additional controls
 Requisitions and
execution risks
Accounting Applications
and Controls:
Recording Data in
Transaction Tables
Prepare purchase order (PO):
 Data entry screen and record
layout
 Purchase orders and
recording risks
 Recorded PO that never
(should have) occurred
 PO not recorded at all,
recorded late, or
unintentionally duplicated
 PO data items not accurate
 Purchase orders and
execution risks
Accounting Applications
and Controls:
Recording Data in
Transaction Tables
Receive goods:
 Data entry screen and record
layout
 Receiving and execution
risks
 Wrong type or product or
service received
 Wrong quantity, quality, or
price
 Receiving and loss of assets
 Receiving and input controls
Accounting Applications
and Controls:
Recording Data in
Transaction Tables
Additional comments:
 Matching controls with
risk in the purchasing and
receiving processes
 Acquisition of services
KEYTERMS
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Purchase order
Purchase requisition