Three-way match as an internal control

The purchasing and accounts payable areas represent high risks associated with errors or asset misappropriation.  Making sure that such errors and misappropriations are mitigated is important and sometimes vital to the survival of a company.  One of the most known mitigation factors is internal controls; and the three-way match in particular (i.e., there are other controls, of course, like segregation of duties.)
The three-way match is a process of comparing information on vendor invoices (vendor bills), company
purchase orders, and receiving reports and resolving any mismatches to ensure payments are processed for valid and authorized purchases.
From the description above, the following documents should be compared before a payment to a vendor (supplier) is processed:

• Vendor invoice (bill)
• Company purchase order
• Company receiving report

There may be variations of the three-way match:

• Two-way match is when vendor invoices (bills) are compared to company purchase orders.  This variation omits the comparison of vendor invoices and purchase orders to company receiving reports because such receipts are not used or are not required.  This may be applicable to service organizations that do not buy physical items, so there are no receiving reports.
• Four-way match is when vendor invoices (bills), company purchase orders, company receiving reports, and (company) inspection reports are compared.  In this variation, the fourth document is an inspection report for received goods.