Identify the internal control weaknesses in Lancaster’s system, and recommend ways to correct them. Adapted from the CMA Examination Weakness Recommendation authorization form describing The purchase requisition should include an item the item to be acquired, why it is description, why the item is needed, estimated costs needed, expected costs, and and benefits, account code, useful life, depreciation benefits. method, and management approval. purchases over a certain Large sums of money can be spent on equipment. amount are not reviewed and Large purchases should be approved by top approved by top management. management requisitions for fixed Authorized equipment acquisitions should be assets are intermingled with processed using special procedures and purchase requisitions for inventory, even orders. though they are very different purchases. This results in a lack of Copies of equipment purchase orders should be control over the much more distributed to all appropriate departments so they can expensive equipment acquisitions. be monitored. mention of pre-numbered Pre-numbered purchase requisitions and purchase purchase requisitions or purchase orders should be used so that all documents can be orders. accounted for. engineering is not inspecting Machinery and equipment should be subject to normal machinery and equipment upon receiving routines. In addition, plant engineering receipt. should inspect the machines to make certain the correct item was delivered and that it was not damaged in transit. is not tagged and All new machinery and equipment should be assigned controlled to prevent theft. a control number and tagged at the time of receipt. engineering is not helping engineering should help with the equipment with the equipment installations. installations to ensure expensive equipment is not damaged. and equipment Machinery and equipment accounting procedures,
Identify the internal control weaknesses in Lancaster’s system, and recommend ways to correct them. Adapted from the CMA Examination Weakness Recommendation authorization form describing the item to be acquired, why it is needed, expected costs, and benefits. purchases over a certain amount are not reviewed and approved by top management. The purchase requisition should include an item description, why the item is needed, estimated costs and benefits, account code, useful life, depreciation method, and management approval. Large sums of money can be spent on equipment. Large purchases should be approved by top management requisitions for fixed assets are intermingled with requisitions for inventory, even though they are very different purchases. This results in a lack of control over the much more expensive equipment acquisitions. mention of pre-numbered purchase requisitions or purchase orders. Authorized equipment acquisitions should be processed using special procedures and purchase orders. Copies of equipment purchase orders should be distributed to all appropriate departments so they can be monitored. Pre-numbered purchase requisitions and purchase orders should be used so that all documents can be accounted for. engineering is not inspecting machinery and equipment upon receipt. is not tagged and controlled to prevent theft. engineering is not helping with the equipment installations. and equipment Machinery and equipment should be subject to normal receiving routines. In addition, plant engineering should inspect the machines to make certain the correct item was delivered and that it was not damaged in transit. All new machinery and equipment should be assigned a control number and tagged at the time of receipt. engineering should help with the equipment installations to ensure expensive equipment is not damaged. Machinery and equipment accounting procedures,
rais12_SM_CH07.docx