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IV.

Internal Control
1. Warehouse Department
- Warehouse manager is responsible in checking the notebook
containing the quantity of raw materials still available in the warehouse.
When the manager saw that the quantity of raw materials are currently
at a low level, he will make copies of order list to be given to the
purchasing department. If the warehouse manager is absent, the
worker will be the one to do it.
- Upon receiving the goods, the manger reconciles the goods received
with the order list to see if there are damaged goods or incorrect items
delivered.
- The cash will be given to the warehouse manager and will be the one to
pay the vendor.

2. Purchasing Department
- Purchasing manager is the one who authorizes the purchase of raw
material and the payment to be made. She is also responsible in
recording the purchase and cash disbursement transaction.

3. Cash Control
- The purchase manager has the control over cash. For purchasing
purposes, there is always a certain amount of cash on hand to be used
as needed. The cash on hand is kept by the manager in a cabinet which
has a lock. If the cash on hand is not enough, the purchasing manager is
the only one authorized to withdraw cash from the bank.

4. Inventory Control
- The warehouse manager has the custody on the inventory and is also
the one responsible for the recording in the inventory notebook.
Updating of inventory records generally happens on a weekly basis,
but it may also depend on the demand of goods.
Strengths and Weaknesses

A. Strengths
1. The warehouse manager checks the availability of the raw materials in
the warehouse before preparing the order list.
- This avoids excessive inventory being ordered which may cost the
entity a huge amount of handling cost.
2. The warehouse manager inspects and counts the goods received.
- This reduces the risk of accepting incorrect items, damaged goods
and/or incomplete orders.
3. There is a segregation of duties.
- Custody of the inventory is being done by the warehouse manager
while the recording of cash disbursement and authorization of
purchase is being done by the purchasing manager.
B. Weaknesses and Recommendations
Weaknesses Recommendations

There is no valid vendor file. To prevent the occurrence of


kickbacks and delay of orders, the
entity must set up a list of entities
which always sell the needed
materials by the entity.

The warehouse manager is The purchasing manager must be


responsible for making the order the one to receive the goods in
list and the receiving of goods. order to ensure that all the items that
are listed in the order list is being
received by the entity.

The custody of inventories and the To reduce the risk of pilfering raw
recording of inventory amount is materials, the purchasing manager
being done by the warehouse must be the one to record the
manager. inventory.