Question

Cornick Company ordered 15 widgets from Stringson, Inc. Only 12 widgets were received; the other 3 were on back order at Stringson. An invoice for 15 widgets was received at Webster, recorded, and eventually paid. What control plan would prevent this?

Answer 1

To prevent payment for undelivered goods, companies should implement a three-way match system that ensures invoices match the purchase orders and receiving reports before processing payments.

Step-by-step explanation:

To prevent the issue of paying for undelivered goods, as happened with Cornick Company and Stringson, Inc., a strong internal control system should be implemented. The control plan that would prevent this situation is called a three-way match. The three-way match system involves matching the purchase order (what was ordered), to the receiving report (what was received), and the invoice (what is being billed for). If all three documents do not match, payment should not be processed until the discrepancy is resolved. This system ensures that a company only pays for goods that have been actually received. Establishing such a protocol would typically involve training the accounts payable department to recognize and resolve discrepancies before making payments.