Question

The unit prices the vendor charged were in excess of those that had been negotiated. The invoice tendered by the vendor was paid. What control plan would prevent this?

Answer 1

To prevent overpaying a vendor beyond the negotiated prices, a company should implement a control plan that includes purchasing controls, invoice verification procedures, segregation of duties, and regular audits.

Step-by-step explanation:

The issue described involves a vendor charging more than the negotiated prices and an invoice being incorrectly paid. This situation highlights the need for a control plan in organizations to prevent overpayment. A control plan that would prevent this would involve implementing purchasing controls and invoice verification procedures. Purchasing controls ensure that the prices paid for goods or services adhere to agreed terms. Invoice verification procedures involve cross-referencing invoice details with purchase orders and contract terms before processing a payment. This verification can be part of a broader internal control system that includes segregation of duties, where the person who authorizes a payment is different from the one who processes the payment. Regular audits and reviews can also help detect and prevent discrepancies. In the given scenario, Noel's vigilance in spotting the error before it led to an overpayment is an example of how a thorough check can save a company from significant financial errors. However, to prevent such instances systematically, adopting robust controls is essential.