15 Feb Materials purchase requisitions are first approved by the plant foreman, who then sends them to the purchasing department. Purchasing department employees enter the purchase requis

Materials purchase requisitions are first approved by the plant foreman, who then sends them to the purchasing department. Purchasing department employees enter the purchase requisition information into the computer, automatically generating a purchase order in sequential order. The system automatically generates an electronic copy of the purchase order, which is sent by purchasing department employees to the vendor. The receiving department electronically accesses a copy of the purchase order, which is printed to serve as a receiving report.
Delivered materials are immediately sent to the storeroom. The completed receiving report, which is a printed copy of the purchase order, is sent to the purchasing department. A copy of the receiving report is sent to the storeroom. Materials are issued to factory employees after a verbal request by one of the foremen.
When the mailroom clerk receives vendors’ invoices, he or she forwards them to the purchasing department employee who placed the order. The invoice is compared with the electronic copy of the purchase order for price and terms by the employee. The invoiced quantity is compared with the receiving department’s report. After checking footings, extensions, and discounts on the vendor invoice, the employee indicates approval for payment by initialing the invoice. The invoice is then forwarded to the accounting department (voucher section), where it is coded for account distribution, assigned a voucher number, and entered into the accounting system for recording in the voucher register. The system tracks invoices due by the payment date due. The purchase order and receiving report are filed in the purchasing department.
On payment dates, the system automatically generates a payment request. The system automatically prepares checks and a transaction list to make a cash disbursements journal, updates the accounts payable master file, and indicates the payment date for the voucher register. Prenumbered checks are sent to the cashier, who puts them through the check-signing machine. The checks are then sent to the voucher section, which makes sure that the checks were correctly prepared. The checks are placed in envelopes and sent to the mailroom. The vouchers are subsequently filed in numerical order. At the end of each month, a computer listing of voucher and cash disbursement transactions and an outstanding accounts payable list are prepared.
The Treasurer reviews monthly reports of acquisitions by the vendor to identify critical vendors. This is used to determine whether any represent key vendors that should be disclosed and whether the company faces risk due to overreliance on a few vendors.
Required:
1. Make a flowchart for the acquisition and the payment cycle for Johnson Machinery Company. Please show the flowchart!
2. List the controls in existence for each of the seven transaction-related audit objectives for acquisitions.
3. For each control in part 2, list one test of the control procedure for verifying its effectiveness.
4. List the most critical deficiencies in the acquisition and payment cycle.
5. Identify the most likely error or fraud resulting from each of the deficiencies listed in part 4.
6. Suggest a system alteration for JMC to correct each of the deficiencies identified in part 4. Be sure to keep cost/benefit in mind.
7. Design an audit program to test internal control. The program should include, but not be limited to, tests of controls from part 3 and procedures to compensate for the deficiencies in part 4.