Expenditure Cycle :

Purchasing and Cash Disbursements

Zaldy Adrianto
zaldy.adrianto@unpad.ac.id
 INTRODUCTION
The primary external exchange of information is with
suppliers (vendors).
Information flows to the expenditure cycle from other
cycles, e.g.:
The revenue cycle, production cycle, inventory control,
and various departments provide information about the
need to purchase goods and materials.
Information also flows from the expenditure cycle:
Information is provided to the general ledger and
reporting function for internal and external financial
reporting.
 INTRODUCTION

The primary objective of the

expenditure cycle is to minimize
the total cost of acquiring and
maintaining inventory, supplies, and
services.
 EXPENDITURE CYCLE
BUSINESS ACTIVITIES
The three basic activities performed in
the expenditure cycle are:
Ordering goods, supplies, and services.
Receiving and storing these items.
Paying for these items.
These activities mirror the activities in
the revenue cycle.
 ORDERING GOODS,
SUPPLIES, AND SERVICES
Key decisions in this process involve
identifying what, when, and how much to
purchase and from whom.
Weaknesses in inventory control can create
significant problems with this process:
Inaccurate records cause shortages.
One of the key factors affecting this process
is the inventory control method to be used.
 ORDERING GOODS,
SUPPLIES, AND SERVICES
Alternate inventory control methods
We will consider three alternate
approaches to inventory control:
Economic Order Quantity (EOQ)
Just in Time Inventory (JIT)
Materials Requirements Planning
(MRP)
 Economic Order Quantity
(EOQ)
the traditional approach to managing inventory.
Goal: Maintain enough stock so that production doesn’t get
interrupted.
Under this approach, an optimal order size is calculated by
minimizing the sum of several costs:
Ordering costs
Carrying costs
Stockout costs
The EOQ formula is also used to calculate reorder point, i.e.,
the inventory level at which a new order should be placed.
Other, more recent approaches try to minimize or eliminate
the amount of inventory carried.
Materials Requirements
Planning (MRP)

MRP seeks to reduce inventory

levels by improving the accuracy of
forecasting techniques and
carefully scheduling production and
purchasing around that forecast.
Just in Time Inventory (JIT)

JIT systems attempt to minimize or eliminate

inventory by purchasing or producing only in
response to actual (as opposed to forecasted)
sales.
These systems have frequent, small deliveries
of materials, parts, and supplies directly to
the location where production will occur.
A factory with a JIT system will have multiple
receiving docks for their various work centers.
 Similarities and differences
between MRP and JIT:
Scheduling production and inventory
accumulation.
MRP schedules production to meet
estimated sales and creates a stock of
finished goods inventory to be available for
those sales.
JIT schedules production in response to
actual sales and virtually eliminates finished
goods inventory, because goods are sold
before they’re made.
Similarities and differences
between MRP and JIT:
Scheduling production and inventory
accumulation
Nature of products
MRP systems are better suited for products that
have predictable demand, such as consumer staples.
JIT systems are particularly suited for products
with relatively short life cycles (e.g., fashion items)
and for which demand is difficult to predict (e.g.,
toys associated with movies).
Similarities and differences
between MRP and JIT:

Scheduling production and inventory

accumulation
Nature of products
Costs and efficiency
Both can reduce costs and improve efficiency over
traditional EOQ approaches.
Similarities and differences
between MRP and JIT:
Scheduling production and inventory accumulation
Nature of products
Costs and efficiency
Too much or too little
In either case, you must be able to:
Quickly accelerate production if there is
unanticipated demand.
Quickly stop production if too much
inventory is accumulating.
 ORDERING GOODS,
SUPPLIES, AND SERVICES
Whatever the inventory control system, the order
processing typically begins with a purchase request
followed by the generation of a purchase order.
A request to purchase goods or supplies is
triggered by either:
The inventory control function; or
An employee noticing a shortage.
Advanced inventory control systems automatically
initiate purchase requests when quantity falls below
the reorder point.
 ORDERING GOODS,
SUPPLIES, AND SERVICES
The need to purchase goods typically results in the creation
of a purchase requisition. The purchase requisition is a
paper document or electronic form that identifies:
1. Who is requesting the goods
2. Where they should be delivered
3. When they’re needed
4. Item numbers, descriptions, quantities, and prices
5. Possibly a suggested supplier
6. Department number and account number to be charged
Most of the detail on the suppliers and the items purchased
can be pulled from the supplier and inventory master files.
 ORDERING GOODS,
SUPPLIES, AND SERVICES
The purchase requisition is received by a
purchasing agent (aka, buyer) in the
purchasing department, who typically
performs the purchasing activity.
In manufacturing companies, this
function usually reports to the VP of
Manufacturing.
 ORDERING GOODS,
SUPPLIES, AND SERVICES
A crucial decision is the selection of supplier.
Key considerations are:
Price
Quality
Dependability
Especially important in JIT systems because
late or defective deliveries can bring the
whole system to a halt.
Consequently, certification that suppliers meet
quality standards is important.
 ORDERING GOODS,
SUPPLIES, AND SERVICES
Once a supplier has been selected for a
product, their identity should become
part of the product inventory master file
so that the selection process does not
have to be carried out for every
purchase.
A list of potential alternates should also be
maintained.
For products that are seldom ordered, the
selection process may be repeated every time.
 ORDERING GOODS,
SUPPLIES, AND SERVICES
It’s important to track and periodically evaluate
supplier performance, including data on:
Purchase prices
Rework and scrap costs
Supplier delivery performance
The purchasing function should be evaluated
and rewarded based on how well it minimizes
total costs, not just the costs of purchasing
the goods.
 ORDERING GOODS,
SUPPLIES, AND SERVICES
A purchase order is a document or electronic form
that formally requests a supplier to sell and deliver
specified products at specified prices.
The PO is both a contract and a promise to pay. It
includes:
Names of supplier and purchasing agent
Order and requested delivery dates
Delivery location
Shipping method
Details of the items ordered
 ORDERING GOODS,
SUPPLIES, AND SERVICES
Multiple purchase orders may be completed for one
purchase requisition if multiple vendors will fill the
request.
The ordered quantity may also differ from the
requested quantity to take advantage of quantity
discounts.
A blanket order is a commitment to buy specified items
at specified prices from a particular supplier for a set
time period.
Reduces buyer’s uncertainty about reliable material
sources
Helps supplier plan capacity and operations
Procurement eCatalog
(LKPP)
Procurement eCatalog
(LKPP)
 ORDERING GOODS,
SUPPLIES, AND SERVICES
IT can help improve efficiency and effectiveness of
purchasing function.
The major cost driver is the number of purchase
orders processed. Time and cost can be cut here
by:
1. Using EDI to transmit purchase orders.
2. Using vendor-managed inventory systems.
3. Reverse auctions.
4. Pre-award audits.
 RECEIVING AND
STORING GOODS
The receiving department accepts deliveries from
suppliers.
Normally, reports to warehouse manager, who
reports to VP of Manufacturing.
Inventory stores typically stores the goods.
Also reports to warehouse manager.
The receipt of goods must be communicated to the
inventory control function to update inventory
records.
 RECEIVING AND
STORING GOODS
The two major responsibilities of the receiving
department are:
Deciding whether to accept delivery.
Verifying the quantity and quality of
delivered goods.
The first decision is based on whether there is a
valid purchase order.
Accepting un-ordered goods wastes time,
handling and storage.
 RECEIVING AND
STORING GOODS
Verifying the quantity of delivered goods is important so:
1. The company only pays for goods received.
2. Inventory records are updated accurately.
The receiving report is the primary document used in this
process:
1. It documents the date goods received, shipper, supplier, and
PO number.
2. Shows item number, description, unit of measure, and
quantity for each item.
3. Provides space for signature and comments by the person
who received and inspected.
Receipt of services is typically documented by supervisory
approval of the supplier’s invoice.
RECEIVING AND STORING GOODS

When goods arrive, a receiving clerk compares the PO

number on the packing slip with the open PO file to
verify the goods were ordered.
Then counts the goods.
Examines for damage before routing to warehouse
or factory.
Three possible exceptions in this process:
1. The quantity of goods is different from the amount
ordered;
2. The goods are damaged; and
3. The goods are of inferior quality.
 RECEIVING AND
STORING GOODS
If one of these exceptions occurs, the purchasing agent
resolves the situation with the supplier.
1. Supplier typically allows adjustment to the invoice for
quantity discrepancies.
2. If goods are damaged or inferior, a debit memo is
prepared after the supplier agrees to accept a return or
grant a discount.
One copy goes to supplier, who returns a credit memo
in acknowledgment.
One copy to accounts payable to adjust the account
payable.
One copy to shipping to be returned to supplier with
the actual goods.
 RECEIVING AND
STORING GOODS
IT can help improve the efficiency and
effectiveness of the receiving activity:
Bar-coding
RFID
EDI and satellite technology
Audits
 http://
https://
www.reyrey.com/ www.hammer.net/
images/solutions/ images/
PartsBarCode.jpg RFIDbenefits.jpg

RFID RFID
http://i.msdn.microsoft.com/dynimg/IC126170.gif http://i.msdn.microsoft.com/dynimg/IC83289.gif
http://www.motorola.com/web/Business/Products/RFID/ http://www.rfidconsultants.com/
_Images/Banner_RFID_Tags_324x279.jpg PolyIC_%20polymer_flexible_RFID_tag.jpg
 PAYING FOR GOODS
AND SERVICES

There are two basic sub-processes

involved in the payment process:
Approval of vendor invoices
Actual payment of the invoices
Approval of vendor invoices
Approval of vendor invoices is done by
the accounts payable department, which
reports to the controller.
The legal obligation to pay arises when
goods are received.
But most companies pay only after receiving and
approving the invoice.
This timing difference may necessitate adjusting
entries at the end of a fiscal period.
Approval of vendor invoices
Objective of accounts payable:
Authorise payment only for goods and
services that were ordered and actually
received.
Requires information from:
Purchasing—about existence of valid
purchase order.
Receiving—for receiving report
indicating goods were received.
 Approval of vendor
invoices

There are two basic approaches to

processing vendor invoices:
Non-voucher system
Voucher system
Actual payment of the invoices
Payment of the invoices is done by the
cashier, who reports to the treasurer.
The cashier receives a voucher package,
which consists of the vendor invoice and
supporting documentation, such as
purchase order and receiving report.
This voucher package authorizes
issuance of a check or EFT to the
supplier.
 PAYING FOR GOODS
AND SERVICES
Processing efficiency can be improved by:
1. Requiring suppliers to submit invoices by EDI.
2. Having the system automatically match invoices to
POs and receiving reports.
3. Eliminating vendor invoices.
4. Using procurement cards for non-inventory purchases.
5. Using company credit cards and electronic forms for
travel expenses.
6. Preparing careful cash budgets to take advantage of
early-payment discounts.
7. Using FEDI to pay suppliers.
PARTIAL ORGANIZATION CHART
FOR UNITS INVOLVED IN
EXPENDITURE CYCLE

• Selects suitable suppliers

• Issues purchase orders
PARTIAL ORGANIZATION CHART
FOR UNITS INVOLVED IN
EXPENDITURE CYCLE

• Decides whether to accept

deliveries
• Counts and inspects
deliveries
PARTIAL ORGANIZATION CHART
FOR UNITS INVOLVED IN
EXPENDITURE CYCLE

• Stores goods that

have been
delivered and
accepted
PARTIAL ORGANIZATION CHART
FOR UNITS INVOLVED IN
EXPENDITURE CYCLE

• Approves invoices
for payment
PARTIAL ORGANIZATION CHART
FOR UNITS INVOLVED IN
EXPENDITURE CYCLE

• Issues payment to
vendors
 CONTROL: OBJECTIVES,
THREATS, AND PROCEDURES
In the expenditure cycle (or any cycle), a well-designed AIS
should provide adequate controls to ensure that the
following objectives are met:
1. All transactions are properly authorized.
2. All recorded transactions are valid.
3. All valid and authorized transactions are recorded.
4. All transactions are recorded accurately.
5. Assets are safeguarded from loss or theft.
6. Business activities are performed efficiently and
effectively.
7. The company is in compliance with all applicable laws
and regulations.
8. All disclosures are full and fair.
 CONTROL: OBJECTIVES,
THREATS, AND PROCEDURES
There are several actions a company can take with
respect to any cycle to reduce threats of errors or
irregularities. These include:
Using simple, easy-to-complete documents with clear
instructions (enhances accuracy and reliability).
Using appropriate application controls, such as validity
checks and field checks (enhances accuracy and
reliability).
Providing space on forms to record who completed and
who reviewed the form (encourages proper
authorizations and accountability).
 CONTROL: OBJECTIVES,
THREATS, AND PROCEDURES

Pre-numbering documents (encourages

recording of valid and only valid
transactions).

Restricting access to blank documents

(reduces risk of unauthorized transaction).
 CRIME TIME
Before we discuss specific threats, it may
be helpful to have some background on a
form of occupational fraud and abuse
which is broadly referred to as corruption.
Corruption cases often involve
arrangements between a company’s
purchasing agent and a sales
representative for one of the company’s
vendors.
 CRIME TIME
The vendor’s representative may try to induce the
purchasing agent to buy goods that:
Are over-priced
Are of inferior quality
Aren’t even needed
Aren’t even delivered
In exchange, the vendor’s rep typically offers the
purchasing agent something of value. That
“something” might be money, payment of a debt, a
job offer, an expensive vacation, or anything the
purchasing agent might value.
 CRIME TIME
According to the Fraud Examiner’s Manual
published by the Association of Certified
Fraud Examiners, these schemes usually
take four forms:
Bribery
Conflict of interest
Economic extortion
Illegal gratuities
 Bribery
Typically involves the vendor offering
a kickback (something of value) to the
buyer to buy inflated, substandard,
un-needed, or un-delivered goods,
etc.
Alternately, may involve an inducement
to the buyer to rig a competitive
bidding process so that the vendor
gets the bid.
 Conflict of interest

In conflict of interest cases, the

purchasing agent is usually
arranging for his employer to make
purchases from a company in which
he has a concealed interest.
For example, perhaps his wife
owns the vendor company.
 Economic extortion
Economic extortion is basically the reverse
of a bribe.
Instead of the vendor making an offer
of something of value to the purchasing
agent, the purchasing agent may tell
the vendor that he must provide
something of value to the purchasing
agent if he wants to continue to do
business with his employer.
 Illegal gratuities
Illegal gratuities involve gifts that are
given to the purchasing agent by a vendor
after the vendor has been selected.
There was no intent by the vendor to
influence the selection process; the gift
was provided after the fact.
But the problem is that the gift is likely
to impact future decisions by the
purchasing agent.
 THREATS IN ORDERING
GOODS
Threats in the process of ordering goods
include:
THREAT 1: Stockouts and/or excess inventory
THREAT 2: Ordering unnecessary items
THREAT 3: Purchasing goods at inflated prices
THREAT 4: Purchasing goods of inferior quality
THREAT 5: Purchasing from unauthorized suppliers
THREAT 6: Kickbacks
EDI-Related threats
Threats related to purchases of services
THREAT NO. 1—Stockouts
and/or excess inventory
Why is this a problem?
If you run out of merchandise, you may lose
sales.
If you carry too much merchandise, you incur
excess carrying costs and/or have to mark the
inventory down.
Controls:
Accurate inventory control and sales forecasting
systems.
Use of the perpetual inventory method.
THREAT NO. 1—Stockouts
and/or excess inventory
Supplier performance reports that highlight
deviations in product quality, price, and on-time
delivery.
Online accounting information systems to record
changes to inventory in real time.
Bar-coding or RFID of inventory to improve
accuracy.
Periodic physical counts of inventory to verify
accuracy of the records.
THREAT NO. 2—Ordering
unnecessary items
Why is this a problem?
Excess carrying costs.
Obsolete inventory that can’t be sold or has to be
marked down.
A related problem is multiple purchases of the
same item by different units of the organization.
Often occurs when different departments or
divisions have different numbering systems for
parts.
Causes company to miss out on volume discounts.
THREAT NO. 2—Ordering
unnecessary items
Controls:
Design the AIS to integrate the
databases of various units.
Produce reports that link item
descriptions to part numbers.
THREAT NO. 3—Purchasing
goods at inflated prices
Why is this a problem?
Increases product costs.
Reduces profitability and/or damages competitive
position.
Controls:
Price lists for frequently purchased items—stored
in master file and consulted.
Prices of low-cost items determined from
catalogs.
 THREAT NO. 3—Purchasing
goods at inflated prices (con’t)

Bids should be solicited for high-cost and

specialised products.
Purchase orders should be reviewed to be sure
policies have been followed.
Budgetary controls and responsibility accounting
should be utilized to achieve accountability for
cost overruns.
Performance reports should highlight significant
variances for investigation.
THREAT NO. 4—Purchasing
goods of inferior quality
Why is this a problem?
Can result in costly production delays.
Scrap and rework costs may make these materials
more expensive than high-quality alternatives.
Controls:
Compile list of approved suppliers known to provide
goods of acceptable quality.
Review purchase orders to ensure use of approved
suppliers
THREAT NO. 4—Purchasing
goods of inferior quality
Track and review supplier
performance.
Hold purchasing managers responsible
for the total cost of purchases,
including rework and scrap costs.
Requires that the AIS can track
these costs.
 THREAT NO. 5—Purchasing
from unauthorized suppliers
Why is this a problem?
May result in goods of inferior quality.
May cause legal issues .
Controls:
Review purchase orders for use of
approved suppliers.
Restrict access to approved supplier
list.
 THREAT NO. 5—Purchasing
from unauthorised suppliers
Periodically review approved
supplier list for unauthorized
changes.
Work with issuers of
procurement cards to control
which suppliers can accept the
card.
THREAT NO. 6—Kickbacks
Why is this a problem?
Kickbacks are gifts from suppliers to
purchasing agents for the purpose of
influencing their choice of suppliers. They
typically result in many of the preceding
threats, including:
Paying inflated prices.
Buying unneeded items.
Buying goods of inferior quality.
THREAT NO. 6—Kickbacks
Controls:
Prohibit purchasing agents from accepting gifts from
suppliers.
Train employees to respond appropriately to gifts from
suppliers.
Rotate jobs so the same purchasing agent does not deal
with the same suppliers indefinitely.
Audit the activities of purchasing agents.
Enforce mandatory vacations.
Have purchasing agents review and sign annual conflict of
interest statements.
Include clauses allowing vendor audits in contracts with
suppliers.
 EDI-related threats
Why is this a problem?
Users who have malicious intent and/or have
unauthorized access to EDI can submit multiple
unauthorized transactions quickly.
Controls:
Access to the EDI system should be limited to
authorized personnel through passwords, user
IDs, access control matrices, and physical
access controls.
Procedures should be in place to verify and
authenticate EDI transactions.
 EDI-related threats
EDI systems should send an acknowledgment for each
transaction:
Provides an accuracy check.
Helps protect against transmission problems that
could result in loss of an order.
A log of all EDI transactions should be maintained and
reviewed by an independent party.
Encryption should be used to ensure privacy,
particularly for competitive bids.
Digital signatures should be used to ensure authenticity.
Companies should have agreements with suppliers over
EDI-related concerns.
 Threats related to
purchases of services
Why is this a problem?
Services are not a physical product and can’t be
counted. It can be difficult to “audit” whether they
were provided.
Controls:
Hold supervisors responsible for all costs incurred by
their departments.
Compare actual vs. budgeted expenses, and investigate
discrepancies.
Conduct periodic reviews of contracts for services,
including audits of supplier records
THREATS IN RECEIVING
AND STORING GOODS
Threats in the process of receiving and
storing goods include:
THREAT 7: Receiving unordered goods
THREAT 8: Errors in counting received
goods
THREAT 9: Theft of inventory
THREAT NO. 7—Receiving
unordered goods
Why is this a problem?
Results in unnecessary costs to
unload, store, and return the items.
Controls:
Instruct receiving department to
accept goods only if there is an
approved copy of the purchase order.
THREAT NO. 8—Errors in
counting received goods
Why is this a problem?
Company pays for goods that weren’t received.
Inventory records are inaccurate, possibly
leading to stock-outs and lost sales.
Controls:
Bar code and RFID of ordered goods.
Design receiving forms so clerks cannot see the
quantity ordered.
Require receiving clerks to sign receiving
reports to create accountability.
THREAT NO. 8—Errors in
counting received goods

Offer bonuses for catching

discrepancies.
Have inventory control count the
items transferred from receiving.
 THREAT NO. 9—Theft of
inventory
Why is this a problem?
Loss of assets
Inaccurate records
Controls:
Store inventory in secure locations with restricted
access.
Document all intra-company inventory transfers, e.g.:
Goods moving from receiving to warehouse.
Goods moving from warehouse to production floor.
THREAT NO. 9—Theft of
inventory (con’t)
Periodic physical count of inventory and
comparison to records.
More critical items should be counted more
frequently.
Segregation of duties
Separate those who have physical access to
inventory from those who keep records.
Separate both those who have custody and those
who can authorize inventory adjustments from those
who work in the receiving and shipping functions.
 THREATS IN APPROVING AND
PAYING VENDOR INVOICES
Threats in the process of approving and
paying vendor invoices include:
THREAT 10: Failing to catch errors in vendor
invoices
THREAT 11: Paying for goods not received
THREAT 12: Failing to take available purchase
discounts
THREAT 13: Paying the same invoice twice
THREAT 14: Recording and posting errors to
accounts payable
THREAT 15: Misappropriating cash, checks, or EFTs
 THREAT NO. 10: Failing to
catch errors in vendor invoices

Why is this a problem?

Overpaying for merchandise.
Controls:
Check mathematical accuracy of invoices.
Obtain receipts from procurement card users
and verify monthly statement accuracy.
Adopt Evaluated Receipt Settlement ( ERS)
approach—i.e., pay for goods when received
at the price stated in the purchase order.
 THREAT NO. 10: Failing to
catch errors in vendor invoices

Freight-related terminology can be

challenging, so provide accounts payable
staff with training on transportation
practices and terminology.
When freight is paid by the purchaser,
use the same carrier in order to receive
discounts.
THREAT NO. 11: Paying
for goods not received
Why is this a problem?
Increased costs.
Controls:
Compare quantities on invoice with quantities
reported by receiving and inventory control
departments.
Use ERS (Evaluated Receipt Settlement)
With respect to services, have tight
budgetary controls and provide careful review
of departmental expenses.
THREAT NO. 12: Failing to take
available purchase discounts
Why is this a problem?
Reduces profitability.
Controls:
File approved invoices by due date and track
that way.
Prepare cash flow budgets to determine
whether the company has adequate cash flow
to take advantage of early payment discounts.
THREAT NO. 13: Paying
the same invoice twice
Why is this a problem?
Reduces profitability.
Can create a cash crunch if a large invoice is
paid twice.
Controls:
Approve invoices for payment only when
accompanied by a complete voucher package (PO
& receiving report).
Only pay on original copies of invoices.
THREAT NO. 13: Paying the
same invoice twice (con’t)
Cancel the invoice once the check is
signed.
Have internal auditors or consultants
help detect and recover
overpayments.
In invoice-less accounts payable
systems, control access to the master
file and monitor all changes.
THREAT NO. 14: Recording and
posting errors to accounts
payable
Why is this a problem?
May result in disgruntled suppliers.
Causes errors in financial and performance reports.
Controls:
Appropriate data entry and processing controls,
such as comparing the differences in vendor
balances before and after processing checks with
the total amount of invoices processed.
Reconcile supplier balances (or unpaid vouchers)
with the accounts payable control account.
THREAT NO. 15: Misappropriating
cash, checks, or EFTs
Why is this a problem?
Loss of assets.
Potentially misleading financial statements if
theft is large enough.
Controls:
Restrict access to cash, blank checks, and
check signing machines.
Have checks numbered sequentially and
periodically accounted for by the cashier.
 GENERAL CONTROL
ISSUES
Two general objectives pertain to activities in
every cycle:
Accurate data should be available when
needed.
Activities should be performed efficiently and
effectively.
The related general threats are:
THREAT 16: Loss, alteration, or unauthorized
disclosure of data
THREAT 17: Poor performance
 THREAT NO. 16—Loss, alteration,
or unauthorized disclosure of data

Why is this a problem?

Loss or alteration of data could cause:
Errors in external or internal reporting.
Inaccurate payment of vendors.
Unauthorized disclosure of confidential vendor
information can cause:
Legal sanctions and fines.
Vendor bidding irregularities.
 THREAT NO. 16—Loss, alteration,
or unauthorized disclosure of data
Controls:
The purchases file, cash disbursements file, accounts payable
master file, and most recent transaction file should be backed
up regularly.
At least one backup on site and one offsite.
All disks and tapes should have external and internal file
labels to reduce chance of accidentally erasing important data.
Access controls should be utilized:
1. User IDs and passwords
2. Compatibility matrices
3. Controls for individual terminals (e.g., so the sales order
department can’t create a receiving report)
4. Logs of all activities, particularly those requiring
specific authorizations
 THREAT NO. 17—Poor
performance
Why is this a problem?
May damage vendor relations
Reduces profitability
Controls:
Prepare and review performance
reports
?