INTERNAL CONTROL OVER STOCK GRADE 12 ACCOUNTING LESSON

INTERNAL CONTROL OVER STOCK GRADE 12 ACCOUNTING LESSON 3 Mr Golightly [Alex Rd] & Ms Stegmann [Hudson Park]

INTERNAL CONTROL OVER STOCK Ø Control over stock should never be underrated in importance. Ø Internal control procedure starts from where the goods are ordered to the point where the goods are sold and or delivered.

INTERNAL CONTROL OVER STOCK A brief procedure is outlined: ü A senior/appointed buyer usually places orders within prescribed limits. ü This person must NOT have access to Creditors accounts, payments or on stock movements to prevent opportunities to commit fraud. ü Order forms should be correctly processed & copies made. E. g 1 copy to accounts, 1 to supplier & 1 for reference.

INTERNAL CONTROL OVER STOCK A brief procedure is outlined continued: ü When stock arrives – check against delivery note & suppliers invoice. ü Suppliers invoice checked against order (calculations checked) ü Invoice sent to senior officer to authorise payment – signs & stamps so can’t be used again to claim. ü Payment by cheque or electronically or recorded into Creditors journal if on credit. o Different person doing journal & posting to avoid fraud

INTERNAL CONTROL OVER STOCK A brief procedure is outlined continued: ü Data of stock must be recorded onto computer o Scanning & barcodes simplifies procedure ü Stock stored & locked up at warehouse o Only authorised personnel have access ü Stock records kept (manually or computer) to be checked by auditors to check reliable & up-to-date ü Reports must be submitted on obsolete, damaged & slow moving stock for decision making

INTERNAL CONTROL OVER STOCK A brief procedure is outlined continued: ü Periodic – needs to ascertain final stock by a physical stock take ü Stocktaking done by people with NO access to stock sheets & invoices ü Stock sheets must be double-checked & calculations verified ü Perpetual – physical count determines stock shortages which must be investigated ü Some do stock take at check out points