Ch.8+Slides - Chapter 8 Acquisition and Expenditure Cycle...

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Chapter 8 Acquisition and Expenditure Cycle 8-1 “Show those numbers to the damn auditors and I‘ll throw you out the $%*@@ window.” (Buddy Yates, director of WorldCom, Inc. general accounting, to an employee asking for an explanation of a large accounting discrepancy). ACC 5320 – Professor Cannon
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Acquisition and Expenditure Cycle What is the matching principle? o Recognition of expenses in the same period as associated revenues Most important assertion in this cycle? o Completeness o Tough !
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Inherent Risk Examples Unrecorded liabilities Noncancelable purchase agreements Capitalizing expenses o What is the incentive to do this? 8-3
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1. Purchase Goods and Services 2. Receiving the Goods or Services 3. Recording the Asset or Expense and Related Liability 4. Paying the invoice through the cash disbursement process Steps in the Acquisition and Expenditure Cycle
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Acquisition & Expenditure Cycle Inventory / Raw Materials Prepaid Expenses Property, Plant, and Equipment Intangible Assets Accrued Liabilities Various Expenses Accounts Payable Cash
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Acquisition & Expenditure Cycle Perform a “walkthrough” of this cycle as a group Identify at least 3-4 inherent risks (i.e., things
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