Sample Cases

CASE 1: EXPENDITURE CYCLE

Question - Part I

The MDEKA Sdn Bhd is a manufacturer of agriculture equipments servicing the southern region of peninsular Malaysia. The management generally has been pleased with the overall operations of the company to date.

Procurement System

However, the present procurement system has evolved through practice rather than having been formally designed. The management is of the opinion that the present procurement system is inadequate and needs revising to ensure the objectives of the procurement system are met. With the intention of understanding the current procurement system, the development team has analyzed and identified several documents that are crucial to the system. The documents identified are:

1. Vendor Invoice
2. Purchase Order
3. Disbursement Voucher
4. Purchase Requisition
5. Packing Slip
6. Receiving Report
7. Cheque

The management of MDEKA intends to redesign the procurement system from the point in time when an item needs to be ordered until payment is made. The system should be designed to ensure that all the proper controls are incorporated into the system.

Required:

a) Identify the internally generated documents and indicate the number of copies of each document that would be needed. Why?

b) Describe the application controls that should be place if each of these internally generated paper documents were replaced by electronic forms.

Suggested Solutions

Part I

(a)
Document
Source
# of copies
Purpose
Purchase order
Internal
5
1 - vendor
2 - accounts payable
3 - receiving
4 - requesting department
5 - purchasing
Purchase requisition
Internal
2
1 - purchasing
2 - requesting department
Receiving report
Internal
3
1 - to accounts payable via inventory stores
2 - purchasing
3 - files in receiving
Check
Internal
2
1 - original to vendor
2 - copy in voucher pkg.
Disbursement voucher
Internal
1 authorizes payment of invoice(s)

(b) A large number of controls are possible, including:

Document