Payment & Acquisition Cycle
by NG LI FEN
1. Documents & Reports.
1.1. Processing Purchase Orders -purchase acquisition -purchase order
1.2. Receiving Goods & Services -receiving report
1.3. Recognizing the Liability -vendor's invoice -debit memo -voucher -acquisitions transaction file -acquisitions journal/listing -accounts payable master file -accounts payable trial balance -vendor statement
1.4. Processing & Recording Cash Disbursements -check -cash disbursement transaction file -cash disbursements journal/listing
2. Methodology for Designing Test of Balances
2.1. Phase 1: *identify client business risk *set tolerable misstatement & assess inherent risk *assess control risk
2.2. Phase 2: *Design & perform test of control and STT
2.3. Phase 3: *Design & perform AP *Design TDB
3. Test of Controls & Substantive Test of Trnasactionss
3.1. Assess Planned Control Risk
3.1.1. Authorization of purchases
3.1.2. Separation of asset custody from other functions.
3.1.3. Timely recording and independent review of transactions.
3.1.4. Authorization of payment
3.2. Determine Extent of Testing of Controls
3.2.1. Identify the internal controls&weaknesses + assess control risk
3.2.2. Performs test of controls to obtain evidence.
3.3. Controls and Substantive Tests of Transactions
3.3.1. Recorded acquisitions are for goods and services received.
3.3.2. Record existing acquisitions
3.3.3. Record acquisitions accurately.
3.3.4. Include acquisitions correctly in the master files
3.3.5. Classify acquisitions correctly
3.3.6. Record acquisitions on the correct dates.