Accounting Information Systems: The Processes and Controls, 2nd Edition

RISKS AND CONTROLS IN EVALUATED RECEIPT SETTLEMENT (STUDY OBJECTIVE 7, continued)

Unfortunately, eliminating parts of a manual matching process also eliminates some of the internal controls inherent in a three-document match of purchase order, receiving report, and invoice. Since some internal controls are eliminated, it becomes necessary to compensate for this loss of controls by strengthening other controls or implementing additional controls. First, the receiving procedures must be established to ensure that goods are accepted only when part numbers and quantities match exactly. There is no reconciliation process later for substitutions, overshipments, or partial shipments. Thus, an organization that wishes to institute an invoice-less matching process must also establish close working relationships with vendors and negotiate firm prices prior to ordering. Since goods are accepted only when quantities match, the vendors must under stand that receiving personnel will not accept a shipment unless it matches exactly. Payment is based on those prior negotiated prices, not on an invoice. This speeds the entire receiving and paying process and eliminates much time and cost in processing payments. The organization and the vendor must work together to minimize exceptions such as substitutions of product, damaged products, and partial shipments. The organization should also have established procedures to handle the few exceptions quickly.

There are also IT risks inherent in an invoiceless ...