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sol19 - Chapter 19 Audit of the Acquisition and Payment...

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19-1 Chapter 19 Audit of the Acquisition and Payment Cycle: Tests of Controls, Substantive Tests of Transactions, and Accounts Payable UIstop Review Questions 19-1 a. Asset accounts: UIstop Office supplies UIstop Delivery equipment UIstop Machinery and equipment UIstop Land UIstop Cash in bank UIstop Prepaid expenses b. Liability accounts: UIstop Accounts payable UIstop Accrued property taxes UIstop Accrued insurance UIstop Other accrued liabilities c. Expense accounts: UIstop Purchases, purchase returns & allowances, purchases discounts (COGS accounts) UIstop Rent expense UIstop Legal expense UIstop Fines and penalties UIstop Advertising expense UIstop Repairs and maintenance UIstop Depreciation expense UIstop Utilities expense UIstop Property tax expense UIstop Administrative expenses UIstop Income tax expense
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19-2 19-2 TRANSACTION- RELATED AUDIT OBJECTIVE POSSIBLE INTERNAL CONTROLS COMMON TESTS OF CONTROLS 1. Recorded cash disbursements are for goods and services actually received (existence). UIstop There is adequate segregation of duties between accounts payable and custody of signed checks. UIstop Supporting documentation is examined before signing of checks by an authorized person. UIstop Approval of payment on supporting documents at the time checks are signed. UIstop Discuss with personnel and observe activities. UIstop Discuss with personnel and observe activities. UIstop Examine indication of approval. 2. Existing cash disbursement transactions are recorded (completeness). UIstop Checks are prenumbered and accounted for. UIstop The bank reconciliation is prepared monthly by an employee independent of recording cash disbursements or custody of assets. UIstop Account for a sequence of checks. UIstop Examine bank reconciliations and observe their preparation. 3. Recorded cash disbursement transactions are accurate (accuracy). UIstop Calculations and amounts are internally verified. UIstop The bank reconciliation is prepared monthly by an independent person. UIstop Examine indication of internal verification. UIstop Examine bank reconciliations and observe their preparation. 4. Cash disbursement transactions are properly classified (classification). UIstop An adequate chart of accounts is used. UIstop Account classifications are internally verified. UIstop Examine procedures manual and chart of accounts. UIstop Examine indication of internal verification. 5. Cash disbursement transactions are recorded on the correct dates (timing). UIstop Procedures require recording of transactions as soon as possible after the check has been signed. UIstop Dates are internally verified. UIstop Examine procedures manual and observe whether unrecorded checks exist. UIstop Examine indication of internal verification. 6. Cash disbursement transactions are properly included in the accounts payable master file and are properly summarized (posting and summarization).
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