Accounting Information Systems:
A Business Process Approach
Chapter Nine: The Acquisition Cycle
- Purchasing and Receiving
Exhibits: 9.3, 9.4, 9.5
Tables: 9.1 - 9.5
Exhibit 9.3 Execution and Recording Risks in an Acquisition Cycle—Purchasing and Receiving
A. Execution risks for receiving goods and services. Execution risks are risks that are
associated with the actual exchange of goods or services with the supplier.

Unauthorized goods or services received

Expected receipt of goods or services did not occur, occurred late, or was
duplicated unintentionally

Wrong type of product or service received

Wrong quantity, quality, or price

Wrong supplier
B. Recording risks. Recording risks represent the risk that event information is not
captured accurately in an organization’s information system. As indicated earlier, for the
purchasing and receiving function, events include creating requisitions, purchase orders,
and receiving goods and services.

Event recorded (requisition, purchase order, or receipt) that never occurred

Event not recorded at all, recorded late, or unintended duplication of
recording

Errors in recording data items such as the following:




records
Wrong type of product or service
Wrong quantity or price
Wrong external or internal agent
Wrong recording of other data items that are stored in event
such as dates, credit terms, general ledger accounts, etc.
Exhibit 9.4 Workflow Controls
Workflow controls include the following (see Exhibit 4.10 on page 143):
1. Segregation of duties.
2. Use of information from prior events to control activities.
3. Required sequence of events.
4. Follow-up on events.
5. Sequence of prenumbered documents.
6. Recording of internal agent(s) accountable for an event in a process.
7. Limitation of access to assets and information.
8. Reconciliation of records with physical evidence of assets.
Exhibit 9.5 Input Controls
Input controls are used to improve the accuracy and validity of data entry. In Exhibit 7.3 on
page 329, the following input controls were identified:

Drop-down or look-up menus that provide a list of possible values to
enter.


with data

data

the






data


where
Scan data rather than entering it.
Record checking to determine whether data entered were consistent
entered in a related table.
Confirmation of data that were entered by a user by displaying related
from another table.
Referential integrity controls to ensure that event records are related to
correct master file records.
Format checks to limit data entered to text, numbers, and date.
Validation rules to limit the data that can be entered to certain values.
Use of defaults from data entered in prior sessions.
Computer-generated values entered in records.
Prompt users to accept/reject data.
Batch control totals taken before data entry compared to printouts after
entry.
Review of edit report for errors before posting.
Exception reports that list cases where defaults were overridden or
unusual values were entered.
Table 9.1 Identification of Events in ELERBE’s Purchasing/Receiving Process
Event
Number Event
E1
Prepare requisition
E2
Approve requisition
E3
Record requisition
E4
Prepare purchase order
E5
Receive goods
Activities
Requestor prepares a paper purchas
requisition form
Supervisor reviews requisition; checks
that budget is available; approves
requisition
Secretary records requisition in
computer
Purchasing officer reviews and
approves requisition; records purchase
order (PO); sends PO to supplier
Receiving clerk receives goods;
checks goods; records receipt
Table 9.2 Workflow Table
Agent
Requestor
Supervisor
Supervisor
Secretary
Computer
Purchasing
officer
Computer
Purchasing officer
Supplier
Receiving clerk
Computer
Receiving clerk
Requestor
Activity
Prepare requisition (E1)
1. Completes a paper purchase requisition form for the item or service.
Approve requisition (E2)
2. Gives requisition to supervisor.
3. Reviews requisition.
4. Approves requisition.
Record requisition (E3)
5. Gives requisition to secretary.
6. Enter requisition data.
7. Checks employee information with Employee Table.
8. Checks supplier information with Supplier Table.
9. Checks inventory information with Inventory Table.
10. Checks that requisition is complete.
11. Creates a record in the Requisition Table.
Prepare purchase order (E4)
12. Reviews new requisitions.
13. Records approval.
14. Creates record in Purchase_Order Table.
15. Prints purchase order.
16. Mails purchase order to supplier.
Receive goods (E5)
17. Sends goods.
18. Receives the goods.
19. Examines packing slip for Purchase_Order#.
20. Enters Purchase_Order# into computer.
21. Enters Quantity_Received.
22. Creates record in Receipt Table.
23. Updates Quantity_On_Hand in Inventory Table (if this
was a purchase of materials inventory).
24. Delivers goods to requestor.
25. Signs for goods.
Table 9.3 Events and Tables Used
Transaction Tables
Needed
None
Event
Prepare
requisition (E1)
Approve
None
requisition (E2)
Record requisition (E3)Requisition
Prepare purchase
order (E4)
Receive goods (E5)
Purchase Order
(purchasing officer)
Receipt
Master Tables Used
None
in computer.
None
in computer.
Inventory
Employee (requestor)
Employee
(supervisor)
Supplier
Employee
Comments
Event data are not entered
Event data are not entered
We assume that the requestor
and supervisor are identified,
but the secretary is not
identified in the requisition.
Supplier
Employee (receiving clerk)
Supplier
Table 9.4 Record Layouts for Purchasing and Receiving
Supplier Table
Supplier# NameAddress
Contact
_Person
Telephone#
G/L_
Account
Due
Discount
Discount
_Rate
Balance
_Due
YTD_Purchases
349
Fall River
Jon
508-555-
1100
30
10
.02
$0
Quantity_
On_Order
0
Quantity_
On_Hand
0
Recent
_Cost
Smith
$0
Employee Table
Employee#
Name
Job Title
122-22-3333
613-20-7891
074-31-2525
131-31-3131
Mike Morgan
Deborah Parker
Stephen Larson
Kevin Smith
Inventory clerk
Supervisor
Purchasing officer
Receiving clerk
Inventory Table
Item#
402
Description
Blank CD
U_of
_M
Case
ReG/L_
G/L_
order Inventory COGS
10
1100
5200
Supplier#
349
Method
FIFO
Requisition_Date
Employee# (Requestor)
Requisition Table (E3)
Requisition#
(Supervisor)
Supplier#
1077
05/15/03
122-22-3333
613-20-7891
Requisition__Detail Table (E3)
Requisition#
1077
1077
Supplier_Product#
C-731
M-1992
402
419
Item#
Quantity
12
5
$13
$18
Price
Employee#
349
Table 9.4 Record Layouts for Purchasing and Receiving (Concluded)
Purchase_Order Table (E4)
Purchase
Purchase_
Employee#
_Order# Requisition#
Order_Date
Supplier# Method
599
1077
05/17/03
Shipping_
(purchasing officer)
074-31-2525
349
Purchase_Order_Detail Table (E4)
Purchase Supplier_
Quantity_ Quantity_ Quantity_
_Order# Product# Item#
Ordered Received Canceled Price
599
599
C-172
M-1992
402
419
12
5
0
0
0
0
$11
$18
Receipt_Detail Table (E5)
Receipt# Item#
Quantity
1405
1405
402
419
10
5
Receipt Table (E5)
Receipt#
Purchase_Order#
Receiving_Date
Employee# (Receiving Clerk)
1405
599
05/26/03
131-31-3131
UPS
Table 9.5 Controlling Recording Risks for Requisitions: Input Controls
Data Item from
Requisition Form
Requisition#
Employee#
(requestor)
to
Employee#
(supervisor)
ensure
the
Department
details.
the Department
Requisition_
Date
Input Controls
A unique Requisition# can be generated by the computer.
Employee could be selected from a drop-down list of employees
from Employee Table.
Referential integrity could be enforced between Employee and
Requisition tables to ensure that the Employee# in the Requisition Table corresponds
an actual department in the Employee Table.
When a data item is entered, the system can confirm the data entry by displaying the
employee’s name, once the Employee# is entered.
Employee# could be selected from a drop-down list of employees
from the Employee Table.
Referential integrity could be enforced between Employee and Requisition tables to
that the Employee# in the Requisition Table corresponds to an actual department in
Employee Table.
Confirmation could be employed here, in the same way as it was
done for the Employee#.
A Department Table could be set up with Department#, Name, and other
Department# could be selected from a drop-down list of departments from
Table.
Referential integrity could be enforced between Department and
Requisition tables to ensure that the Department# being recorded
corresponds to an actual department in the Department Table.
Display current date as default. Use format checks to ensure entry
of valid dates.
Table 9.5 Controlling Recording Risks for Requisitions: Input Controls (Concluded)
Data Item from
Requisition Form
Supplier#
Table.
tables
Item#
tables
part in
Quantity
Price
Input Controls
Supplier# could be selected from a drop-down list of suppliers from Supplier
Referential integrity could be enforced between Supplier and Requisition
to ensure that Supplier# in the Requisition Table corresponds to an actual
department in the Supplier Table.
Confirmation could be used if the system is programmed to display
the supplier’s name once the Supplier# is entered.
For inventory requisitions, Item# could be selected from a drop-down list of
items from the Inventory Table.
Referential integrity could be enforced between Inventory and Requisition
to ensure that the Item# in the Requisition Table corresponds to an actual
the Inventory Table.
Again, there is an opportunity for confirmation.
Format checks can be used to ensure that a numeric value is entered.
Validation rules (limits) can be used to ensure that large
amounts of inventory are not ordered by mistake.
Format checks can be used to ensure that a numeric value is entered.
Defaults can be set up so that the system shows the price of
the item from the Inventory File.