Controls for Outflows
Accounting 544 / Internal Control Systems

Department of Accounting
February 16, 2015

Organizations are always fighting to prevent fraud from happening in their day-to-day operations. Fraud can occur almost anywhere within an organization, but it is common in areas of the expenditure cycle because of inadequate recording of transactions or the uncertainty of when to record transactions. When actions such as these occur, the organizations financial statements are understated which causes concerns for financial statement users. For these reasons, organizations need to implement strong internal controls to prevent errors or fraudulent activities from occurring within their daily operations. Team B will discuss several proposals for implementing appropriate controls to cover purchasing, accounts payable, cash disbursements, finance, investment, and payroll.
Purchasing
According to Louwers, Ramsay, Sinason, and Strawser (2007), purchasing is the gaining of goods or services for the expenditure of cash. It affects more accounts in the general ledger than any other action. It affects inventory, cash, and accounts payable just to name a few (Chapter 8, Acquisition and Expenditure Cycle).
Typical source documents for purchasing include invoices from suppliers and vendors, purchase orders, receiving reports made when orders arrive, purchase journal, and fixed asset report. There may be occasions when some items in inventory is unaccounted for due to missing documents. Items that have arrived with no invoice for the delivery; a receiving report is made for the shipment and is held in an unmatched receiving reports file until more information arrives. If the invoice arrives before the shipment does so then this would go into an unmatched invoice file. This file can also be reviewed to determine if liabilities are unrecorded by looking into