Chap006-LN

Chap006-LN - Chapter 06: Auditing the Acquisition and...

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Chapter 06: Auditing the Acquisition and Expenditure Business Process CHAPTER 06 Auditing the Acquisition and Expenditure Business Process After studying this chapter, you should be able to: 1. Describe the acquisition and expenditure business process. 2. Explain the transactions in the business process. 3. Understand an applicable financial reporting framework (GAAP) for recording transactions in the business process. 4. Understand misstatements (errors and fraud) that could be expected in the acquisition and expenditure process. 5. Explain financial statement assertions for accounts in the business process. 6. Describe the methods the auditor uses to gather evidence for internal controls in the business process. 7. Understand the methods auditors use to gather substantive evidence using analytical procedures, substantive tests of transactions, and substantive tests of balances. 8. Describe auditing procedures for tangible assets—land, building, and equipment—and intangible assets. 9. Explain audit procedures for accrued liabilities. 10. Explain the disclosure requirements for accounts in the acquisition and expenditure business process. Chapter 6: Auditing the Acquisition and Expenditure Business Process Chapter Highlights This chapter provides a description of the acquisition and expenditure business process first from the accounting perspective and then from the auditing perspective. The accounts and the accounting transactions are reviewed, as well as the financial accounting framework for recording expense transactions under U.S. GAAP and International Financial Reporting Standards (IFRS). Once the accounting for the expense process is examined, management’s assertions for the financial statements are discussed and the potential misstatements in the expense process are evaluated. The relevant assertions identified for this process help to establish the tests of controls and substantive tests. (with special sections focusing on the search for unrecorded liabilities, auditing changes in the land, building, equipment and intangible assets accounts; and accrued liabilities). The chapter then summarizes how the auditor determines whether the evidence collected is sufficient and appropriate to make an audit conclusion about the acquisition and expenditure business process and then presents the disclosures for the financial statements. To better understand the accounting transactions for the business process, T-accounts and journal entries are used in the beginning of the chapter; while Exhibit 6-4, “Examples of Expense or Accounts Payable Fraud” discusses real-world examples of fraud. Exhibit 6-5 provides an example of an Internal Control Questionnaire and Exhibit 6-6 provides Financial Information for the continuing BCS Example illustrating tests of controls and substantive tests. In addition, actual financial statement disclosures are in Exhibit 6-9. Chapter Outline
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Chap006-LN - Chapter 06: Auditing the Acquisition and...

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