Which control activity ensures payment accuracy by matching three documents in procurement?

Which control activity ensures payment accuracy by matching three documents in procurement?

• A. Separation of duties across purchasing, receiving, and accounting
• B. Three-way matching
• C. Batch processing
• D. Dual control of cash

Answer: (B)

Three-way matching is the control activity designed to ensure payment accuracy in procurement by comparing three essential documents: the purchase order, the receiving report, and the vendor invoice. The purchase order records what was originally agreed to buy, including items, quantities, and prices. The receiving report confirms what was actually received and in what condition, providing a real test of what was delivered. The vendor invoice requests payment and reflects what the supplier claims was delivered and billed. By aligning these three documents, the organization verifies that the goods or services were ordered, were actually received, and are billed at the agreed price and terms. Any discrepancies—such as receiving more or fewer units than ordered, a different price, or services invoiced that weren’t received—triage into a hold or exception workflow before payment is made. This reduces the risk of paying for nothing received, paying multiple times for the same delivery, or paying at incorrect rates. Other controls play important roles, but they don’t perform the same verification step. Separating duties across purchasing, receiving, and accounting helps prevent fraud and errors by ensuring no single person controls the entire process, though it doesn’t itself verify invoice accuracy. Batch processing is about efficiency in handling many transactions at once, not the accuracy check for each payment. Dual control of cash provides safeguards over disbursements but doesn’t embed the document-level verification across PO, receipt, and invoice.

Three-way matching is the control activity designed to ensure payment accuracy in procurement by comparing three essential documents: the purchase order, the receiving report, and the vendor invoice. The purchase order records what was originally agreed to buy, including items, quantities, and prices. The receiving report confirms what was actually received and in what condition, providing a real test of what was delivered. The vendor invoice requests payment and reflects what the supplier claims was delivered and billed.

By aligning these three documents, the organization verifies that the goods or services were ordered, were actually received, and are billed at the agreed price and terms. Any discrepancies—such as receiving more or fewer units than ordered, a different price, or services invoiced that weren’t received—triage into a hold or exception workflow before payment is made. This reduces the risk of paying for nothing received, paying multiple times for the same delivery, or paying at incorrect rates.

Other controls play important roles, but they don’t perform the same verification step. Separating duties across purchasing, receiving, and accounting helps prevent fraud and errors by ensuring no single person controls the entire process, though it doesn’t itself verify invoice accuracy. Batch processing is about efficiency in handling many transactions at once, not the accuracy check for each payment. Dual control of cash provides safeguards over disbursements but doesn’t embed the document-level verification across PO, receipt, and invoice.