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Explain the control deficiencies (indicating specific controls that are not achieving the desired effect, that is, mitigating the corresponding risks to the desired level) in spondon's purchases system and suggest improvements to overcome these deficiencies.

QUESTION 1 You are carrying out the audit of the purchases system of Spondon Furniture. The company has revenue of $10 million and all the shares are owned by Ms. and Mrs. Fisher, who are non-executive directors and are not involved in the day-to-day running of the company. The bookkeeper maintains all the accounting records and prepares the annual financial statements. The company uses a standard computerized accounting package. You have determined that the purchases system operates as follows: . When materials are required for production, the production manager sends a handwritten note to the purchasing manager. For orders of other items, the department manager or managing director sends handwritten notes to the purchasing manager. The purchasing manager finds a suitable supplier and raises a purchase order. The purchase order is signed by the managing director. Purchase orders are not issued for all goods and services received by the company Materials for production are received by the goods received department, who issue a goods received note (GRN), and send a copy to the bookkeeper. There is no system for recording receipt of other goods and services. The bookkeeper receives the purchase invoice and matches it with the goods received note and purchase order (if available). The managing director authorizes the invoice for posting to the ledger The bookkeeper analyses the invoice into relevant nominal ledger account codes and then posts it. . At the end of each month, the bookkeeper prepares a list of payables to be paid. This is approved by the managing director, . The bookkeeper prepares the cheques and remittances and posts the cheques to the payables ledger and cashbook. . The managing director signs the cheques and the bookkeeper sends the cheques and remittances to the payables. Mr. and Mrs. Fisher are aware that there may be deficiencies in the above system and have asked for advice. Explain the control deficiencies in Spondon's purchases system and suggest improvements to overcome the deficiencies

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