Reference no: EM132951564

You have been recently hired as the Controller for Chong Sing Fabrication Ltd. (CSF). CSF manufactures and distributes structural steel components used in the construction of industrial and commercial buildings. To improve the internal controls over purchasing, you have implemented a purchase requisition system for all departments. All purchases must now be documented on a requisition, and approved by the responsible department manager before being forwarded to the purchasing department.

Jock Stewart has been in charge of the steel welding shop for 20 years, and he is challenging the need for setting up the requisition system. "You have no idea what you want to do here. It is a waste of my time and energy. Why do we need this additional paperwork?"

Required

Problem a. Explain the purchase requisition process to Jock. What information needs to be included in each purchase requisition? Why is each important?

Problem b. What will the purchasing department do with purchase requisitions? How does this process improve our internal controls over purchasing?

Problem c. Explain how controls over the purchase of services, from creating the purchase requisition to posting the invoice to the accounts payable sub-ledger, may differ from the procedures for the purchase of goods, as described in your answers to parts (a) and (b).