Audit of the Acquisition and Payment Cycle: Tests of Controls, Substantive Tests of Transactions,...
Audit of the Acquisition and Payment Cycle: Tests of Controls, Substantive Tests of Transactions, and Accounts Payable.
par KING SHU JUAN CEA150041
1. Classes of transactions
1.1. Acquisitions of goods and services
1.2. Cash disbursements
1.3. Purchase returns and allowances and purchase discounts.
2. Acquisitions
2.1. -Inventory -Property, plant, and equipment -Prepaid expenses -Leasehold improvements -Accounts payable -Manufacturing expenses -Selling and administrative expenses
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4. Assess Planned Control Risk
4.1. Authorization of purchases Separation of asset custody from other functions Timely recording and independent review of transactions Authorization of payments
5. Determine Extent of Testing of Controls
5.1. The auditor identifies the key internal controls and weaknesses and assesses control risk
5.2. The auditor performs tests of controls to obtain evidence that controls are operating effectively
6. Controls and Substantive Tests of Transactions for Acquisitions
6.1. Recorded acquisitions are for goods and services received (occurrence) Existing acquisitions are recorded (completeness) Acquisitions are accurately recorded (accuracy)
7. Attributes Sampling
7.1. Because of the importance of tests of controls and substantive tests of transactions for acquisitions and cash disbursements, the use of attributes sampling is common in this audit area.
8. Out-of-Period Liability Tests
8.1. Examine underlying documentation for subsequent cash disbursements Examine underlying documentation for bills not paid several weeks after the year-end Trace receiving reports issued before year-end to related vendors’ invoices
9. Cash disbursements
9.1. Cash in bank (from cash disbursements)
9.2. Accounts payable
9.3. Purchase discounts
10. Business Functions in the Cycle
10.1. Processing Purchase Orders
10.2. Receiving Goods and Services
10.3. Recognizing the Liability
10.4. Processing & Recording cash disbursements
11. Related Documents and Reports
11.1. Processing purchase orders
11.1.1. Purchase requisition Purchase order
11.2. Receiving goods and services
11.2.1. Receiving report
11.3. Recognizing the liability
11.3.1. Vendor’s invoice Debit memo Voucher Acquisitions transaction file Acquisitions journal or listing Accounts payable master file Accounts payable trial balance Vendor statement
11.4. Processing and recording cash disbursements
11.4.1. Check Cash disbursements transaction file Cash disbursements journal or listing