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CACC521-Week11-Ch12-13 - Ch 12 MC 1c 2c 3b,4a 5d 6c 7d 9d...

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Ch 12 MC 1c, 2c, 3b,4a, 5d, 6c, 7d, 9d, 10c, 11c, 12b, 13b, 14c, 15c Ch 13 MC 1d, 2b, 3d, 4c, 5c, 6c, 7b, 8b Purchases, Payables and Payments Process Learning Objectives Describe the purchases, payables and payments process, including typical transactions, source documents, controls and account balances. Outline control tests for auditing control over purchase of inventory, services, and fixed assets and disbursement of cash. Explain the importance of the completion assertion for the audit of accounts payable liabilities and procedures used to search for unrecorded liabilities. Identify audit considerations for observing the physical inventory count. How to do procedures for unrecorded liabilities Inventory counts procedures Chapter Overview Understanding the Purchases, Payables and Payments Process Control Risk Assessment Special Note: The Completeness Assertion for Liabilities Special Note: Physical Inventory Observation Understanding the Purchases, Payables and Payments Process Purchases of goods and services are a major part of cash outflow in most organizations. High level of management planning and control. Risk Assessment for Purchases Payables and Payments To assess risks in the purchasing-related processes, the auditor considers purchasing and cash payment transactions and accounts payable. Understanding of business will point auditors towards specific risks. Existence, ownership, completeness, valuation and disclosure must all be considered. completeness - concerned about understatements Purchases, Payments, and Payables Process: Typical Activities Exhibit 12-1 shows the activities and transactions, accounts and records in the purchases, payables, and payments processes. The basic activities are: purchasing goods and services, and paying the bills. separate functions for each step Purchase, Payables and Payment Process
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Authorization Purchases are made by purchasing departments or authorized purchasers. Purchasing controls such as competitive bids should be in place. - not important for auditor Disbursements are authorized by an accounts payable department. Purchase orders, invoices and receiving reports are matched prior to payment. Cheques are signed by authorized personnel. controls for authorization Custody A receiving department receives goods purchased and forwards them to the proper departments. Custody of cash is the responsibility of personnel assigned to authorize and sign cheques. Access to blank documents should also be considered as an aspect of custody. only authorized staff Recording Purchases should be recorded once the purchase order, receiving report, and vendor invoice are matched. Disbursements are recorded when the cheques are prepared. Periodic Reconciliation
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CACC521-Week11-Ch12-13 - Ch 12 MC 1c 2c 3b,4a 5d 6c 7d 9d...

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