AUI3702 2020 SEMESTER 1 AND 2 EXAM MEMOS
AUI3702 MAY JUNE 2020 MEMO
QUESTION 1
Acquisition and expenditure cycle
1.1 Identify 6 strengths of the acquisition and expenditure cycle described above;
1.1.1 Acquisition Purchase of the right quantity, Requisitions are only issued aligned to
the printout that the computer provides daily of all inventory items that have
dropped below the minimum inventory levels.
1.1.2 Acquisition/Purchase of the right price, as stipulated local spares are purchased from
the supplier identified as being the cheapest at the beginning of the year. For the next
two years orders will then be placed with this supplier.
1.1.3 Acquisition/Purchase of the right time
1.1.4 Acquisition/Purchase of the right spares
1.1.5 Acquisition/Purchase from approved suppliers
1.2 Describe 8 weaknesses in the above system;
Weakness 1.3) Recommendation
There is no contingency plan or control in There has to be process in place to either record the
place in an event that the system may be movement of inventory while the system is offline, or
offline or shut down it has be noted that this function cannot be performed
if the system is off line
There is sole reliance on the computer to There must be a physical validation or checking of
produce a report on the stock levels without the inventory balance to ensure that what the
any checking to validate the accuracy of the computer is producing is accurate and tally’s up to
computer report the physical inventory
No clear segregation of duties, Mr Nkosi In order to mitigate risk, it is vital that segregation of
issues requisitions and sometimes duties is articulated and applied to reduce error and or
authorises them. It stipulated that he does fraud. In the extract ‘Mr Nkosinathi sometimes
so to save some time authorises the requisitions himself and issues order
forms for spares that are imported from Germany’
This must not be
allowed, and the duties need to be segregated. Mr
Nkosi cannot issue a requisition and authorise it
himself.
There also is no appropriate control To mitigate the risk of fraud, order notes must
interms of stationery since the order note have unique sequence numbers
gets the same number as the requisition
There is no independent receiving function, There has to be an isolated receiving function
Mr Nkosi Places orders and he receives managed by a person who is not involved in the in
them himself and it then creates an any other function of the acquisition and payment
opportunity for him to include his own cycle
orders outside what the
business requires
There is a high risk of any error that by occur To mitigate any opportunities of fraud , someone
in Mrs Putters work because there is no high higher than her must actually evaluation her work ,
line to vet and spot and error preferably a finance director
AUI3702 MAY JUNE 2020 MEMO
QUESTION 1
Acquisition and expenditure cycle
1.1 Identify 6 strengths of the acquisition and expenditure cycle described above;
1.1.1 Acquisition Purchase of the right quantity, Requisitions are only issued aligned to
the printout that the computer provides daily of all inventory items that have
dropped below the minimum inventory levels.
1.1.2 Acquisition/Purchase of the right price, as stipulated local spares are purchased from
the supplier identified as being the cheapest at the beginning of the year. For the next
two years orders will then be placed with this supplier.
1.1.3 Acquisition/Purchase of the right time
1.1.4 Acquisition/Purchase of the right spares
1.1.5 Acquisition/Purchase from approved suppliers
1.2 Describe 8 weaknesses in the above system;
Weakness 1.3) Recommendation
There is no contingency plan or control in There has to be process in place to either record the
place in an event that the system may be movement of inventory while the system is offline, or
offline or shut down it has be noted that this function cannot be performed
if the system is off line
There is sole reliance on the computer to There must be a physical validation or checking of
produce a report on the stock levels without the inventory balance to ensure that what the
any checking to validate the accuracy of the computer is producing is accurate and tally’s up to
computer report the physical inventory
No clear segregation of duties, Mr Nkosi In order to mitigate risk, it is vital that segregation of
issues requisitions and sometimes duties is articulated and applied to reduce error and or
authorises them. It stipulated that he does fraud. In the extract ‘Mr Nkosinathi sometimes
so to save some time authorises the requisitions himself and issues order
forms for spares that are imported from Germany’
This must not be
allowed, and the duties need to be segregated. Mr
Nkosi cannot issue a requisition and authorise it
himself.
There also is no appropriate control To mitigate the risk of fraud, order notes must
interms of stationery since the order note have unique sequence numbers
gets the same number as the requisition
There is no independent receiving function, There has to be an isolated receiving function
Mr Nkosi Places orders and he receives managed by a person who is not involved in the in
them himself and it then creates an any other function of the acquisition and payment
opportunity for him to include his own cycle
orders outside what the
business requires
There is a high risk of any error that by occur To mitigate any opportunities of fraud , someone
in Mrs Putters work because there is no high higher than her must actually evaluation her work ,
line to vet and spot and error preferably a finance director
