Outline a system of Internal Check in respect to Purchases.
Internal Check in respect to Purchases.
In order to check error and fraud in purchase department there should be a proper system of control and supervision of the goods purchased. A separate department for credit purchase is usually maintained in business houses. The purchase department should function separately and its work should be sub-divided in small departments, each of which is headed by a responsible officer.
Requisition books should be issued to the various departments of the organization. The head of the department who requires the goods should fill in a requisition slip duly signed and then send it to the purchase department. On receipt of requisition slips from the various departments the purchase department can know exactly the quantity of requirements of different goods to be purchased.
The purchase departments then make an inquiry about the terms and conditions of purchases from different suppliers. Quotations are invited from them.
After the required inquiry from the various suppliers, order is placed with the supplier who agrees to supply quality goods at comparatively less price. Three copies of the orders are prepared. One is sent to the supplier, the second to the stores department and the third copy is kept with the purchase department.
At the time of receipts of goods, the stores department compares the goods supplied with the order placed with the supplier. After comparison and examination the stores department prepares a copy of the goods received which is sent to the purchase department.
When the goods are received, the gate-keeper should enter the particulars of all goods received in the Goods Inward Book after checking them properly. Thereafter, the goods are sent to the Stores Department.
The stores department should prepare a ‘Goods Received Note‘ and send a copy to the Purchase department, accounts Department and the production control department.
After the receipt of goods, the purchase department scrutinizes the requisition slip, the order, the goods received note and the invoice. Invoices are usually checked by a separate person. The number of the order should be entered on the invoice. All these documents should be marked as checked and signed by a responsible officer.
After the invoice being signed by the responsible officer the same is sent to the accounts department to record the entries in the purchase book front the invoice. Frauds on the basis of the double payments can also be checked.