Order of precedence is not set. Please set it in the parameters form

Set up policy parameters

Applies To: Microsoft Dynamics AX 2012 R3, Microsoft Dynamics AX 2012 R2, Microsoft Dynamics AX 2012 Feature Pack, Microsoft Dynamics AX 2012

Policies are internal business controls that you create to enforce business rules that you have outlined for your business. You can create various types of policies, such as audit, purchasing, and expense policies. Before you can create any policies, you must set up the policy parameters for the selected policy type. For example, before you can create purchasing policies, you must set up the purchasing policy parameters.

Policy parameters define the order in which policies are resolved in Microsoft Dynamics AX. For example, when a worker goes to the shopping site on the Employee services portal, the catalog that is displayed is determined by the purchasing policy that is assigned to the worker. If three purchasing policies might apply to the worker, the policy parameters help determine which rule is applied and, ultimately, which catalog the worker sees on the site. Each policy type has its own policy parameters, and therefore, the order of precedence for resolving policies can be different for each type of policy.

Set up policy precedence rules

1. Click Organization administration > Setup > Signing limits > Signing limit policies. On the Action Pane, click Parameters.
   -or-
   Click Compliance and internal controls > Common > Policies > Audit policies. On the Action Pane, click Parameters.
   -or-
   Click Accounts payable > Setup > Policies > Vendor invoice policies. On the Action Pane, click Parameters.
   -or-
   Click Procurement and sourcing > Setup > Policies > Purchasing policies. On the Action Pane, click Parameters.
   -or-
   Click Travel and expense > Setup > Policies > Expense report. On the Action Pane click Parameters.
   -or-
   Click Travel and expense > Setup > Policies > Travel requisition. On the Action Pane click Parameters.
2. The organization types that you created are displayed in the Organization types: field. Select the organization types to make policies for, and then click Add >>.
   For example, if you have organization types of legal entity, region, department, and cost center, but you only have policy variances for legal entities, departments, and cost centers, you only select legal entity, department, and cost center.
3. Select the organization type to list first, and then click the Move up button until the organization type is at the top of the list.
    Note

   When you set up audit policies, you must select at least one organization type, but you do not have to change the order of precedence for those organization types. When an audit policy is run, all rules in that policy are run, regardless of the order of precedence that you define.
4. Repeat these steps until the order of the organization types meets your needs.

Source: Microsoft Docs