A co-worker and I are having a little debate that I was wondering if
you could clear up for us. It is regards to approval to pay. The
situation is that we use an online supplier where employees will place
their order online. During the order they are stating the account to
be charged and the requisition is then routed to the appropriate
management to be approved. Once approved the order is placed to the
online supplier who charges a pcard. These are all low dollar office
supply items and are not "received" into a system formally.
Her argument is that someone needs to print off the pcard transaction
log each month and sign it as proof of "approval to pay". My argument
is that there is no value in such an activity as the person has no idea
whether the things have been received or not and truly is doing nothing
more than rubber stamping the log. My contention is that the
management is approving payment when they approve the order. They are
approving the expenditure of company funds at that time and the need to
print a transaction log and sign it is non-value added.
Now... the question may arise of "how would you ever know if the
supplier wasn't adding charges to the card against orders that were
never officially made?". And to be honest I don't have a great answer
to that other than 1) it is low dollar transactions, 2) there has to be
some level of trust in a relationship, and 3) periodic audits, while
maybe not as thorough, would eventually catch such a thing if it did
occur and require much less tactical time from an employee.
Thoughts? I'm not an accountant so do not know how this relates to
GAAP but would guess that GAAP doesn't go into such detail.