3air_im10 - 231 CHAPTER 10 Acquisition and Expenditure...

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CHAPTER 10 Acquisition and Expenditure Cycle Including Audit of Accounts Payable and Inventory Existence LEARNING OBJECTIVES Review Checkpoints Exercises and Problems Cases 1. Diagram the acquisition and expenditure cycle, including typical source documents and controls. 1, 2, 3, 4, 5, 6, 7, 10, 11, 12, 13 46, 48, 49, 51, 55 64, 66 2. Give examples of detail test of controls procedures for auditing the controls over purchase of inventory and services, acquisition of fixed assets, and disbursement of cash. 8, 9, 14, 15, 19 54, 56 26, 30 3. Describe some common errors, irregularities, and frauds in the acquisition and expenditure cycle, and design some audit and investigation procedures for detecting them. 14, 15, 16, 17, 18 19 50, 52, 53, 63 67, 68, 69, 70, 71 4. Explain the importance of the completeness assertion for the audit of accounts payable liabilities, and list some procedures for a "search for unrecorded liabilities." 21, 21, 22 47, 57, 58 27, 65, 71 5. Identify and describe considerations involved in the audit observation of physical inventory-taking. 23, 24, 25 59, 60, 61, 62 28, 29,68 POWERPOINT SLIDES PowerPoint slides are included on the website. Please take special note of: * Acquisition and Expenditure Cycle SOLUTIONS FOR REVIEW CHECKPOINTS 10.1 A "voucher" is a package of documents, usually with a cover page. (The package can be a small envelope.) The package-voucher contains supporting documents for a transaction. For example, a purchase voucher usually contains a purchase requisition, purchase order, receiving report, vendor invoice, and a negotiable check (check copy when the vendor invoice has been paid). 231
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232 Required approvals and signatures are on the documents. The voucher presents evidence of the documentation and control over a transaction. Computer systems may have all this documentation on disk. In a voucher system, each voucher is "payable," and the detail of the payables is the vouchers themselves. At any time, the company may owe a single vendor more than one invoice represented on several vouchers. In a voucher system, there is no balance payable to each vendor--just a file of different vouchers payable. 10.2 Duplicate payment based on the same supporting documents can be prevented by stamping or impressing "paid" on the voucher and supporting documents, or by perforating (mutilating) the documents so they cannot be reprocessed unintentionally. 10.3 You will find evidence about losses on purchase commitments in the open purchase order file. Evidence about unrecorded liabilities to vendors in the (1) unmatched invoice file, and (2) unmatched receiving report file. 10.4 Main supporting source documents used in an acquisition and expenditure cycle: Purchase requisition Purchase order Receiving report Vendor's invoice Cancelled check or check copy 10.5 Management reports that can be used for audit evidence. What information in them can be useful to auditors?
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This note was uploaded on 02/08/2012 for the course IAF IAF520 taught by Professor Aldcorn during the Winter '08 term at Seneca.

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3air_im10 - 231 CHAPTER 10 Acquisition and Expenditure...

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