Risk assessment checklist - Purchasing cycle

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Check Yes or No or N/A (where not applicable). Where a No is indicated, some action may be required to rectify the situation. Cross-references (e.g., See FN 1.01) point to the relevant policy in the First Reference Internal Control Library. FN = Finance & Accounting PolicyPro, Volume 1; GV = Finance & Accounting Policy- Pro, Volume 2; OP = OMPP policies in FAPP electronic version; IT = Information Technology PolicyPro; NP = Not-for-Profit PolicyPro. Pur1 Pur2 Pur3 Pur4 Pur5 Pur6 Pur7 Pur8 Pur9 Pur10 Do you ensure that personnel responsible for the purchasing, shipping, receiving and payable functions are competent, adequately trained and supervised? See OP 4.06, see also Human Resources PolicyPro Do you ensure that expenses are properly authorized? See FN 2.01, 2.02, 2.03, 2.04, 2.07 Do controls exist to ensure corporate buying cards are only issued to authorized staff and personal purchases are not allowed? See FN 2.01, 2.03 Do you ensure that contracts are properly reviewed and authorized? See FN 2.01 Do you ensure that disbursements are recorded completely and accurately? See FN 2.01, 2.02, 2.03, 2.04, 2.05, 2.06, 2.09, 2.10, 2.11, 2.12, 2.14 Do authorized personnel examine supporting documentation and approve payments up to their individual spending limit? See FN 2.01, 2.10, 5.04 Do payments over department/individual spending limits or a specified dollar amount require the additional approval of senior management? See FN 2.01, 2.10, 5.04 Do signing officers examine supporting documentation to payments and document approval within spending limit? See FN 2.01, 2.10, 5.04 Do you ensure that cash is safeguarded from theft or loss? See FN 2.02 Is access to purchasing, receiving, accounts payable and inventory records restricted to authorized personnel? See OP 2.04, 2.05 2008-2010 First Reference Inc. All Rights Reserved. 1

Pur11 Pur12 Pur13 Pur14 Pur15 Pur16 Pur17 Pur18 Pur19 Pur20 Pur21 Pur22 Pur23 Do you ensure that loans to employees are properly authorized? See FN 2.04 Do you ensure that purchases are properly authorized? See FN 2.05, 2.06, 2.08, 2.10 Do documented controls exist regarding who can issue purchase requisitions/orders and to what dollar limit? See FN 2.06, 2.08 Are spending limits set by reference to budgets or individual levels of authority? Are these limits monitored by the system or manually? See FN 2.06, 2.08, 2.14 Do you maintain the physical security of purchase orders? See FN 2.06 Do you route copies of purchase orders to appropriate personnel? See FN 2.06 Does your system track purchase orders? Do you periodically verify their entry into the system and investigate unusual time delays in data entry and missing purchase orders? See FN 2.06 Do you specify shipment mode and delivery date on purchase orders? See FN 2.06 Are short- or over-shipments received documented? Are details sent to the accounting department on a timely basis? See OP 2.01, 2.02; FN 2.09 Do you periodically obtain competitive bids for each acquisition? See FN 2.06, 2.07 Do you periodically review purchase orders? See FN 2.06, 2.08 Do you ensure that items ordered meet appropriate specifications? See FN 2.06, 2.07, 2.08 Do you route copies of purchase orders for capital expenditures to personnel who process fixed assets, and investigate purchase orders not matched with receiving documentation after anticipated receipt date? See FN 2.06, 2.09 2008-2010 First Reference Inc. All Rights Reserved. 2

Pur24 Pur25 Pur26 Pur27 Pur28 Pur29 Pur30 Pur31 Pur32 Pur33 Pur34 Do you identify and purchase from vendors capable of meeting needs? See FN 2.06, 2.07, 2.08 Do you purchase from legally qualified vendors in accordance with laws, regulations and contracts? See FN 2.06, 2.07, 2.08 Do you update vendor information completely and accurately to reflect open purchase orders? See FN 2.06 Do you consider volume purchases by determining total usage of similar materials, and combine orders to attain volume discounts? See FN 2.07, 2.08 Do you monitor vendor performance in terms of timely delivery and follow-up in cases of poorly performing vendors? See FN 2.07 Do you specify procedures for notification by vendors of potential performance problems and for appropriate investigation and followup? See FN 2.07 Do you investigate and periodically update vendor capabilities regarding production quality and capacity, price (including volume or cash discounts and payment terms), order lead-time requirements, current and former customer satisfaction metrics, financial condition, management stability and pending legal action? See FN 2.07, 2.08 Do you consider ways to simplify vendor investigation procedures? See FN 2.07 Do you periodically update vendor information based on vendor performance in meeting terms and specifications of contract or purchase orders? See FN 2.07, 2.08 Does management regularly review and approve the master vendor list? See FN 2.07, 2.08, 2.14 Do you develop data on alternative vendors and periodically re-evaluate vendor selection decisions? See FN 2.08 2008-2010 First Reference Inc. All Rights Reserved. 3

Pur35 Pur36 Pur37 Pur38 Pur39 Pur40 Pur41 Pur42 Pur43 Pur44 Pur45 Pur46 Pur47 Do you check invoices for correct calculations, discounts, taxes, freight, GST and PST before payment? See FN 2.07, 2.08, 2.09, 2.10 Are goods to be returned segregated from other inventory and tracked separately? See OP 2.01, 2.02, 3.01, 3.02 Do you match receiving information with purchase order information and promptly follow up on outstanding orders? See FN 2.09 Does your system match purchase orders and invoices automatically, and are unmatched documents reported and investigated? See FN 2.09, 2.10, 7.05 Does your system prevent payment for goods/ services without information being recorded on receipt of goods and authorization for payment? See FN 2.09, 2.10 Do you maintain appropriate procedures to inspect items received? See FN 2.09, 3.01, 3.02, 3.03 Does your system prevent duplicate payments on same order? See FN 2.10 Are account distributions recorded by operations? Are they reviewed for reasonability and consistency by the accounting department? See FN 2.10 Do you identify available discounts? See FN 2.10, 2.11 Do you accurately record returns and allowances for all authorized credits, and only for such credits? See FN 2.10, 2.11 Are suppliers statements reconciled to accounts payable monthly and reviewed by management? See FN 2.10 Does management follow up creditor queries on a timely basis? See FN 2.10 Does management address the reasons for debit balance creditor accounts on a timely basis? See FN 2.10, 7.05 2008-2010 First Reference Inc. All Rights Reserved. 4

Pur48 Pur49 Pur50 Do you ensure that tax liabilities are reduced to the legal minimum? See FN 2.13 Do you ensure that tax documents filed are accurate? See FN 2.13 Do you record the effect of all tax transactions or economic events completely and accurately? See FN 2.13 2008-2010 First Reference Inc. All Rights Reserved. 5