ACT 4497 Lecture ch15

ACT 4497 Lecture ch15 - Assurance Services and the...

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Unformatted text preview: Assurance Services and the Integrity of th Modern Auditing: Modern Auditing: Financial Reporting, 8 Edition California Polytechnic State University at San Luis Obispo William C. Boynton Portland State University Raymond N. Johnson Chapter 15 – Auditing the Expenditure Cycle Chapter Overview Chapter Overview The Expenditure Cycle The Expenditure Cycle Develop Audit Objectives Develop Audit Objectives Understanding the Entity and Understanding the Entity and Environment Inherent Risk, Including the Risk of Inherent Risk, Including the Risk of Fraud • Management Misstatement of Expenditures – Understate expenses – Understate payables • Other Misstatement Factors – – – – High volume of transactions Unauthorized purchases Misappropriation Duplication of payments Analytical Procedures Analytical Procedures Consideration of Internal Control Consideration of Internal Control Components • Control Environment • Risk Assessment • Information and Communication • Monitoring Purchase Transactions – Documents and Purchase Transactions – Documents and Records • Purchase requisition • Purchase order • Approved vendor master file • Open purchase order file • Receiving report • Receiving file • Vendor Invoice Purchase Transactions – Common Purchase Transactions – Common Documents and Records • Voucher • Exception reports • Voucher summary • Voucher register • Purchase transactions file • Accounts payable master file • Suspense files Purchase Transactions – Functions and Purchase Transactions – Functions and Control Activities • Initiating Purchases – Placing vendors on an authorized vendor list – Requisitioning goods and services – Preparing purchase orders • Receipt of Goods and Services – Receiving the goods – Storing goods received for inventory – Returning goods to vendor • Recording Liabilities Systems Flowchart – Purchase Systems Flowchart – Purchase Transaction Systems Flowchart – Purchase Systems Flowchart – Purchase Transaction Systems Flowchart – Purchase Systems Flowchart – Purchase Transaction Cash Disbursement Transactions– Cash Disbursement Transactions– Common Documents and Records • Check • Check Summary • Cash Disbursements Transaction File • Cash Disbursements Journal or Check Register Cash Disbursement Transactions­ Cash Disbursement Transactions­ Function and Control Activities • Computerized System – Paying the Liability – Recording the Disbursement • Manual System – Paying the Liability – Recording the Disbursement Systems Flowchart – Cash Disbursement Systems Flowchart – Cash Disbursement Transactions Purchase Adjustment Transactions– Purchase Adjustment Transactions– Common Documents and Records • Purchase Return Authorization • Shipping Report • Debit Memo Purchase Adjustment Function and Controls Purchase Adjustment Function and Controls • Purchase Returns and Allowances • Other Controls • Tests of Controls Designing Substantive Tests Designing Substantive Tests • Tests of Details of Transactions – Vouch Recorded Payables to Supporting Documentation – Perform Cutoff Tests • Purchases cutoff tests • Cash disbursement cutoff tests • Purchase return cutoff tests – Perform Search for Unrecorded Payables • Subsequent payments Designing Substantive Tests Designing Substantive Tests • Tests of Details of Balances – Accounts Payable Confirmations – Reconcile Unconfirmed Payables to Vendor Statements • Tests of Details of Disclosures ...
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This note was uploaded on 02/07/2011 for the course ACT 4497 taught by Professor Lewis during the Spring '11 term at Troy.

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