Good internal control dictates that no one person or department should handle all aspects of a transaction from beginning to end. It is important to separate the functions of authorizing transactions from recording transactions and maintaining custody over assets. If possible, the purchasing, receiving and accounts payable functions should be clearly separated and processed in different departments.
The following audit steps are used to evaluate the effectiveness of the controls over procurement by testing controls over the purchasing, receiving and accounts payable functions. Analysis using audit software and electronic files is an extremely useful tool in evaluating effectiveness.
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