- Collusion between customers and sales invoicing departments controlled by sequential issue of delivery notes and independent check and despatch documentation to invoices.
- Failure to raise despatch documentation i.e. goods leave the premises without delivery notes.
- Improperly raised credit notes to cover misappropriation of cash and reduce customers debts.
- Cashiers - teeming and lading. Bank all monies collected and have a pay in slip as a proof of deposit.
PURCHASES AND CREDITORS
Potential errors or irregularities
- Liabilities being set up for goods that were not authorised or not received.
- Liabilities incurred but not recorded.
- Making payments without proper documents and authorisation.
- Misallocation of funds to the wrong general ledger accounts.
- Goods being returned without being recorded.
Implications of the above errors
- Loss of resources because of paying for goods never received. Unreliable records being kept.
- Understatement of liabilities hence disputes with suppliers.
- Paying for services and goods not received.
- Overstatement of expenses and creditors.
- Misstatement of various expense and accounts that do not show the true and fair view.
- Overstatement of purchases. Loss of receipts due to the company.
- Improve inspection procedures at goods inwards stage.
- Specific employees should have authority and power for the requisition of goods.
- Requisitions should be serially numbered.
- Central buying system which ensures; buy in bulk discount, avoid clerical costs & small orders, know reliable suppliers, plan of Economic order quantity (EOQ) & lead times.
- Order should have delivery date and prices.
- LPO serially numbered.
- Good received note should be serially numbered.
- Before payment of invoices take them for approval.
- Pre-numbered goods received notes. (GRN)
- Matching of goods received note and suppliers invoices.
- Pre-numbered Local Purchase Order (LPO)
- Investigate unmatched GRN and LPO
- Before approval original documents must be completed. Once payment is made stamp “PAID” on the documents.
- Code all expenses and or amounts. Use budgetary control measures.
- Claims subject to numerical control. A genuine cheque can be presented for a second payment. This is a collusion between employee and supplier. Cheques should be immediately despatched to the payee and never go back to anyone who had to do with it especially the cashier.