17. You have completed an audit of activities
within the purchasing department of Steven Company. The department
employs thirty buyers, seven supervisors, a manager, and clerical
personnel. Purchases total about P500 million a year. Your audit
disclosed the following: The company has no formal rules on
conflicts of interest. Your analysis produced evidence that one of
the thirty buyers in the department owns a substantial interest in
a major supplier and procures supplies averaging P50, 000 a year
from that supplier. The prices charged by the supplier are
competitive. Buyers select proposed sources without submitting the
lists of bidders for review. Your tests disclosed no evidence that
higher costs were incurred as a result of that practice. Buyers who
originate written requests for quotations from suppliers receive
the suppliers' bids directly from the mailroom. In your test of one
hundred purchases based on competitive bids, you found that in
seventy-five cases the low bidders were awarded the purchase
orders. 4> Purchase requisitions received in the purchasing
department from other departments in the company must be signed by
persons authorized to do so. Your examination of 200 requests
disclosed that three, all for small amounts, were not properly
signed. The buyer who had issued all three orders honored the
requests because he misunderstood the applicable procedure. The
clerical personnel charged with reviewing such requests had given
them to the buyer in error. Required: For each of the four
conditions, provide the following information. a. What risk, if
any, is incurred if each condition is permitted to continue? b.
What control, if any, would you recommend to prevent continuation
of the condition described?
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