Case Study On Internal Control Of Procurement In Company A

Procurement is the start of an enterprise’s operations.The material cost is an important part of the total cost in manufacturing businesses.It’s much more obvious in commercial aircraft manufacture.There is an significant sense for enterprises to buy materials in suitable time,appropriate amounts and unit-price.Because it can reduce cost and increase profit.Thus,if an enterprise can focus on internal control of procurement,it will elevate the level of procurement management,financial performance,and be propitious to achieve the strategic objective.Company A is a large-scale state-owned enterprise who involves in designing,testing,manufacturing,selling,import and export trading.It’s engaged in commercial aircraft manufacturing industry through international cooperation such as joint-design and subcontract production.The procurement itself has some characters such as procurement in advance base on manufacturing plan,the manufacturing technology affecting the amount ordered,relying on overseas suppliers,materials purchased changing as the development stage proceeds,long lead time,the specialty of materials,and so on.Recently,when the variety of business is increasing and the expansion of company,the procurement is becoming more and more sophisticated while its management is becoming more and more difficult.The author tracked and analyzed the procurement in Company A,based on the Guidelines for the Application of Internal Control in Enterprises No.7-Purchaing and the Internal Control-Integrated Framework.After researching,The author have found a number of problems.Such as delay of maintenance for the storage of materials in SAP system,late on releasing procurement order,manual modification the receiving status,returned remittance’s failed to be received by account,management process which can’t satisfy the development need,lack of price tracking method,the muddled allocation of materials between different items.The author analyzed the causes of the problems in five actors of internal control.The main causes of the problems is the delay on update of management processes,the vague division of duties,the incomplete recognition of risks in business flow paths,information systems’ failure on satisfying the operation needs,failed to separated incompatible positions and insufficient use of auditing.The author proposed solutions for aforementioned problems.Such as consummating the management structure,propagating the company culture,building assessment and evaluation system focusing on business and internal control,separating the incompatible position,setting up or updating the management processes promptly,improving the efficiency of inward and outward communications,and strengthening the administration on procurement.The author hope it can help company A to reduce the risk on procurement,meanwhile increase the financial performance and overall competitiveness.This thesis took company A as the object to study and focused on the internal control of procurement.It shows both the merits and backwards of the internal control in procurement.The research production can not only optimize the internal control of Company A,but also provide reference for other companies in the same industry.