Question

Vendors should be approved by Management before purchase department executes an order. If this is not done, then which of the following situations may arise?

• A. Purchase could be made from vendors whose product quality may not be good
• B. Purchases may be made from related parties without management's knowledge
• C. Purchases could be made from vendors who may have offered price to vice president purchases
• D. Any of these

Answer 1

The correct option is D Any of these

There should be vendor on boarding process in the organization. This process involves complete health check of any organization which includes the financial position, past track records, compliance, quality of the product. If vendors are following the criteria set by the policy approved by the management, than only vendor will be on boarded.

In absence of proper vendor selection process, below situation may arise:

• Inferior quality of material could be procurred
• Purchases may be made from related parties without the management's knowledge.
• Purchases are made from the vendor who has bribed vice president.