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List down internal control procedures for raw material purchasing system of a large manufacturing firm

List down internal control procedures for raw material purchasing system of a large manufacturing firm

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Wilfred
Internal control procedures for purchasing system
•• The company should have clear division of duties between the various departments i.e. the manufacturing department, stores department and factory department.
•• A responsible official should be charged with the duty of overseeing purchase of raw materials in the company and should report to the managing director or other appropriate senior level of management.
•• The company should establish the re-order levels for purchase of all materials used in production. When the re-order level is reached a purchase requisition should be raised and must be authorized by the factory managers. This should then be sent to the purchasing department.
•• Upon receipt of the purchase requisition, it should be checked to confirm that the transaction is authorized. Another person should prepare a purchase order and submit this together with the purchase requisition for the authorization by purchasing manager.
•• Upon delivery an official from stores department must inspect the goods for quality and quantity. All units received should be recorded in a suitable documentation e.g. a goods received note (GRN) which store’s staff and supplier’s staff should counter sign.
•• The goods received note and the suppliers invoice should be taken to the accounts department where an independent person should post the entries to the purchases ledger.
•• Before payments are made to the suppliers, supplier’s statement should be reconciled to the ledger balance.
Wilfykil answered the question on April 12, 2019 at 09:02

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