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Unformatted text preview: 12-22The following audit procedures may be applied to company records and documents to discover evidence of defalcations being committed by the buyer:(1)Perform a detailed consideration of the internal controls relating to purchasing to ascertain whether there are any weaknesses that might permit the buyer to commit a fraud. The review should include the determination through tests of controls that the controls are actually being observed and that approvals and countersignatures are not being given perfunctorily. The auditors' remaining tests should then be concentrated in the areas of high control risk.(2)Examine a representative sample of purchase orders issued by the buyer to determine that they have been prepared and issued in accordance with established company policy, particularly with respect to the countersignature of purchase orders over $500. Determine whether any orders for amounts in excess of $500 were split into two or more orders to evade the $500 limitation.(3)Compare the representative sample of purchase orders with their related approved requisitions to ascertain that the purchase orders issued were for goods and services required by the client company and are supported by an authorized document originated outside of the purchasing department.(4)Test the authenticity of the suppliers by reference to telephone directories, purchasing directories, credit-rating publications, etc. This step may disclose any dummy or fictitious vendors through which the buyer might later obtain funds.(5)Review the disbursing procedures and examine paid checks, giving particular attention to the payee and the endorsement. This step will indicate whether the buyer has access to checks and might reveal any fraud in their negotiation.12-32(a)(3)Inventory need not be on hand at year-end. For example, purchases in transit on which title has passed to the client should also be included. (b)(3)The shipping department, not the receiving department, is responsible for preparation of a shipping document....
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This note was uploaded on 04/29/2010 for the course ACC 411 taught by Professor Smith during the Spring '10 term at Saint Louis.
- Spring '10