Purchasing Procedure of Platinum - Assignment

Running head: PURCHASING PROCEDURE OF PLATINUM
PURCHASING PROCEDURE OF PLATINUM
Name of the Student
Name of the University
Author Note

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Executive Summary:
Information system (IS) has emerged as one of the most prominent choice for the
organisations to sustain themselves while enjoying a competitive advantage. The discussed
report has discussed the purchase process of special orders in Platinum Manufacturing Group
and it has been identified that the organisation is suffering from some serious internal control
weaknesses that can prove to adversely crucial in long run. The identified weaknesses are
related to the documentation of the purchase process and the vagueness of its purchase
process. Hence, the paper has recommended potential measures to mitigate the identified
internal control weakness. The recommendations are most based on adoption of the IT
services to enhance the organisational operations while mitigating the internal control
challenges. To conclude, the paper, it had been justified that the suggested system will be
compatible with the new systems, if the discussed organisation plans to renovate the existing
IT infrastructure of the organisation.

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Table of Contents
Expenditure process of Special Order........................................................................................3
Level 0 Data Flow Diagram.......................................................................................................4
Internal Control Weakness:........................................................................................................4
Identification..........................................................................................................................5
Impact.....................................................................................................................................5
Recommendations..................................................................................................................6
Flexibility...............................................................................................................................8
References:.................................................................................................................................9

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Expenditure process of Special Order
The expenditure process for the special order of the Platinum manufacturing is
completed in multiple steps the first being the head of the department sending a purchasing
requisition to the purchase department. In the next step one of the five buyers out of the five
employed by the organisation verifies the order to ensure that the request is being made by
the head of the department. Post the verification the buyer selects the most suitable buyer for
the operation and asks for a price quotation while placing a verbal order. A pre-numbered
purchase order is then processed and sent to the head, accounts and other departments. The
receiving department on receiving the purchase order verifies that the received equipment and
the placed order are similar or not. After the verification is successful they forward to the
relevant departments. The accounts department on receiving the purchase order, verifies the
purchase order with the invoice received by the vendor and after it is justified a payable is
forwarded to the treasurer. The checks below $10,000 are signed through machine while
above them are signed by the cashier and machine as well before completing the purchase
process and paying the vendor.

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Level 0 Data Flow Diagram
Figure 1: Level 0 Data Flow Diagram of Special Order Purchase Process
(Source: Created by Author with assistance of MS Visio)
Internal Control Weakness:
Internal control weakness of an organisation is a rational that defines the weaknesses
that are associated with the organisational operations (Prabowo, Christy & Nitasari, 2017).
The internal control weakness in the discussed scenario is relevant to the purchase process
and the following section will identify, measure the impact and recommend potential
solutions for the identified internal control weakness. The justification over the compatibility
of the proposed methodologies with the changeable IT infrastructure of the organisation will
also be considered before concluding the paper. The first step is to evaluate the internal

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control weakness of the purchase process of the discussed organisation which has been
discussed as follows:
Identification
The first and foremost of the weakness identified in the purchase process of special
orders by the Platinum is there verbal communication mode. It is evident from the discussion
that the organisation believes in verbal notifications rather than offering notifications that are
paper or electronic based. The discussed measure by the organisation may lead to multiple
issues within the organisation that are associated with the auditing process, storage of data
properly and justifying the purchase process in dire situations (Gallenmore & Labro, 2015).
The lack of proper data (writer or electronic data) will prove to be troublesome for the
organisation during the times of tax returns, justifying themselves legally and similar other
situations (Su, Zhao & Zhou, 2014). Additionally, the verbal communication even increases
the chance of internal and external fraud which can prove to be very chaotic for the
organisation (Yu, Zhang & Zheng, 2016). The processing of the purchase process is also very
vague in the organisation because they go through the verification process multiple time
which is time and effort consuming (Guo et al., 2015). Hence, in conclusion, it can be stated
that the core internal control weakness of the discussed organisation lays in their
communicational means and the vagueness of the departmental operations.
Impact
Impact of the internal control weakness within an organisation can have catastrophic
effect on the organisation. The foremost and one of the most prominent impact that the
organisation faces due to the internal control weakness is the over or under payment on the
purchased item. If, the organisation overpays then they will suffer financial and will even cite
negative impact on their financial assets (Feng, McVay & Skaife, 2014). While, in case of
under payment they will suffer from poor quality of the received item which will prove to be

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trouble for the organisation in the long run. The poor quality of the work will lead to
maintenance expenditures that includes time, effort and money along with halts in the
organisational operations. The next most prominent challenge they will face is the legal and
auditing issues as stated in the section above. Due to improper documentation the deemed
organisation may get into legal troubles as they will be unable to produce the necessary data
to the legal authorities and it is very well known that the legal issues can affect the
sustainability of an organisation (De Simmone, Ege & Stomberg, 2014). Then during the time
of auditing processes due to lack of proper documentation, the results will be inaccurate and
will ultimately lead to formulation of financial budget that is inaccurate and hence, negatively
impact the organisation. Other significant challenges are also offered by the internal control
weakness to an organisation and hence, it is recommended to mitigate the identified weakness
in shortest possible time. The potential measures in the following section may assist Platinum
to tackle the identified weaknesses.
Recommendations
Platinum is suffering from internal control weakness and it is affecting the
organisation and hence they need to mitigate the risks. To achieve the above-stated objective
the first step that the organisation need to take is to change their communicational measure
and instead of making verbal notifications within or outside the organisation they should opt
for written notifications (Bauer, Henderson & Lynch, 2017). The organisation can achieve it
by introducing electronic communicational means which will ensure that the sharing of
information is recorded. The electronic communicational means include the tools which can
be audited when necessary and even offers assistance in communication (DeFond & Lennox,
2017). Emails, official chats messengers, fax and other tools are the discussed
communicational tools. In case, the organisation is not obsolete with the electronic means
then they should use notepads and other means for communicational purpose. However,

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electronic sharing of information is recommended because it will save the organisational
resources and is hassle free. Additionally, the use of electronic means will also reduce the
chance of frauds relevant to the organisation from both within and outside.
Another significant weakness identified in the organisation is the purchase process
and the vagueness it offers. The purchase process within the organisation makes multiple
verifications and even offers no specific control over the procedure. The purchase team can
make the budget according to their need because no proper monitoring body supervises over
them. Additionally, the repeated verification of deliverable and other relevant documentations
also consumes time (Feng et al., 2014). Hence, it is advised that the organisation should equip
electronic purchase order system which offers the capability of mitigating the above
mentioned challenges. The discussed system notifies the user that the purchase order is going
over the budget, if the user is attempting to make a fraud. Additionally, the system will
electronic verify the deliverables that includes the invoice, items and others with the purchase
order to ensure the success of the discussed process. The adoption of the discussed system
will even assist in the auditing and safekeeping of the documents which can be used by the
organisation during the time of needs (Khairi & Baridwan, 2015). Another notable advantage
that adopting the system will offer is of competitive advantage in the market because of fast
and accurate accounting that the organisation will enjoy. The documentation will also be
accurate and the security concerns can also be avoided by buying the system from reliable
source such as Oracle, Xero and other major IT giants who offer similar services (Roffel &
Chin, 2017). Hence, it can be stated that adopting the accounting information system can
assist the organisation in mitigating all of its identified internal control weakness.
Flexibility
The changes that are recommended for the purchase process of the Platinum are based
on the IT services which can easily be integrate with the changing organisational IT

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infrastructure (Akpolat, 2017). The reason lays on the fact that the recommended measures
are adoption of Accounting IS which is an advance version of It and if the organisation
decides to equip another IT system then they would not have to buy new tools instead they
can merge the services together. Hence, it is stated that the adoption of Accounting IS is the
most suitable method for Platinum to mitigate their internal control weakness and earn
competitive advantage at same time.

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Bauer, A. M., Henderson, D., & Lynch, D. P. (2017). Supplier Internal Control Quality and
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De Simone, L., Ege, M. S., & Stomberg, B. (2014). Internal control quality: The role of
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DeFond, M. L., & Lennox, C. S. (2017). Do PCAOB inspections improve the quality of
internal control audits?. Journal of Accounting Research, 55(3), 591-627.
Feng, M., Li, C., McVay, S. E., & Skaife, H. (2014). Does ineffective internal control over
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Roffel, B., & Chin, P. (2017). Computer control in the process industries. CRC Press.
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