Publicado em 22 de abr de 2014
Principles of Auditing: Professor Liburd
Lecture 13
Acquisition & Expenditure Cycle
4/16/14
Please visit our website at http://raw.rutgers.edu
TIME STAMPS
0:39 Overview of the Acquisition and Expenditure Cycle
1:37 Inherent Risks
8:45 Documents and Records in the Cycle
11:42 Audit Evidence in Management Reports and Data Files
14:17 Major Functions of the Purchasing Process
18:46 Internal Controls Audit Approach
19:39 Key Functions & Duties
21:00 Control Procedures
22:46 Assertions about Classes of Transactions & Events
23:38 Assertions about Account Balances at the period end and substantive procedures
28:28 The Completeness Assertion
32:44 Purchase Cutoffs
33:02 SKIP UNTIL 51:02
51:03 Disclosure Items for the Purchasing Process
51:31 Other Accounts in the Cycle
51:42 Accrued Liabilities
52:24 Auditing Accrued Liabilities & Prepaid Expenses
53:14 Auditing Accounts Payable & Accrued Expenses
54:02 Income Taxes Payable
55:07 Auditing Property, Plant, & Equipment
56:03 Fraud Red Flags
The acquisition & expenditure cycle involves processing purchase orders, receiving goods and services, recognizing the liability, and processing and recording cash disbursements.
Inherent risks involve unrecorded liabilities (errors resulting from ineffective controls related to recording receipts of goods or services, fraudulent financial reporting resulting from recognizing expenses and liabilities in the proper period), noncancellable purchase agreements (necessary to recognize losses due to permanent declines in market value) and capitalizing expenses.
Documents and records involved in the acquisition & expenditures cycle include purchase requisitions, purchase orders, receiving reports, vendor's invoice, checks, accounts payable master file, and CD master file.
Audit evidence in management reports and data files include open purchase orders, unmatched receiving reports, unmatched vendor invoices, accounts (voucher) payable trial balances, purchase journals, and fixed asset reports.
The functions of the purchasing process includes requisitioning (initiation and approval of requests for goods and services by authorized individuals consistent with management criteria), purchasing (approval of purchase orders and proper execution as to price, quantity, quality, and vendor), receiving (receipt of properly authorized goods and services), invoice processing (processing of vendor invoices for goods and services received; also processing of adjustments for allowances, discounts, and returns), disbursements (processing of payment to vendors), accounts payable (recording of all vendor invoices, cash disbursements, and adjustments in individual vendor accounts), general ledger (proper accumulation, classification, and summarization of purchases, cash disbursements, and payables in the general ledger).
The internal controls audit approach involves understanding internal controls (study the client's flowcharts, review internal control questionnaires, perform walk-through tests), assess planned control risk (authorization of purchases, segregation of duties, timely recording and independent review of transactions, authorization of payments), and determining the extent of testing of internal controls (identify the key internal controls and weaknesses and assesses control risk, perform tests of controls to obtain evidence that controls are operating effectively.
Segregation of duties: The purchasing function should be segregated from the requisitioning and receiving functions (if one individual is responsible for the requisition, purchasing, and receiving functions, fictitious purchases can be made. This can result in the theft of goods and possibly payment for unauthorized purchases. The invoice-processing function should be segregated from the accounts payable function (if one individual is responsible for the invoice-processing and accounts payable function, purchase transactions can be processed at the wrong price of terms or a cash disbursement can be processed for goods not received; this can result in overpayment of goods or the theft of cash), the disbursement function should be segregated from the accounts payable function (if one individual is responsible for the disbursement function and also has access to the accounts payable records, unauthorized checks supported by fictitious documents can be issued and unauthorized transactions can be recorded; this can result in theft of the entity's cash), and the accounts payable function should be segregated from the general ledger function (if one individual is responsible for the accounts payable records and also for the general ledger that individual can conceal any defalcation that would normally be detected by reconciling subsidiary records with the general ledger control account.
Lecture 13
Acquisition & Expenditure Cycle
4/16/14
Please visit our website at http://raw.rutgers.edu
TIME STAMPS
0:39 Overview of the Acquisition and Expenditure Cycle
1:37 Inherent Risks
8:45 Documents and Records in the Cycle
11:42 Audit Evidence in Management Reports and Data Files
14:17 Major Functions of the Purchasing Process
18:46 Internal Controls Audit Approach
19:39 Key Functions & Duties
21:00 Control Procedures
22:46 Assertions about Classes of Transactions & Events
23:38 Assertions about Account Balances at the period end and substantive procedures
28:28 The Completeness Assertion
32:44 Purchase Cutoffs
33:02 SKIP UNTIL 51:02
51:03 Disclosure Items for the Purchasing Process
51:31 Other Accounts in the Cycle
51:42 Accrued Liabilities
52:24 Auditing Accrued Liabilities & Prepaid Expenses
53:14 Auditing Accounts Payable & Accrued Expenses
54:02 Income Taxes Payable
55:07 Auditing Property, Plant, & Equipment
56:03 Fraud Red Flags
The acquisition & expenditure cycle involves processing purchase orders, receiving goods and services, recognizing the liability, and processing and recording cash disbursements.
Inherent risks involve unrecorded liabilities (errors resulting from ineffective controls related to recording receipts of goods or services, fraudulent financial reporting resulting from recognizing expenses and liabilities in the proper period), noncancellable purchase agreements (necessary to recognize losses due to permanent declines in market value) and capitalizing expenses.
Documents and records involved in the acquisition & expenditures cycle include purchase requisitions, purchase orders, receiving reports, vendor's invoice, checks, accounts payable master file, and CD master file.
Audit evidence in management reports and data files include open purchase orders, unmatched receiving reports, unmatched vendor invoices, accounts (voucher) payable trial balances, purchase journals, and fixed asset reports.
The functions of the purchasing process includes requisitioning (initiation and approval of requests for goods and services by authorized individuals consistent with management criteria), purchasing (approval of purchase orders and proper execution as to price, quantity, quality, and vendor), receiving (receipt of properly authorized goods and services), invoice processing (processing of vendor invoices for goods and services received; also processing of adjustments for allowances, discounts, and returns), disbursements (processing of payment to vendors), accounts payable (recording of all vendor invoices, cash disbursements, and adjustments in individual vendor accounts), general ledger (proper accumulation, classification, and summarization of purchases, cash disbursements, and payables in the general ledger).
The internal controls audit approach involves understanding internal controls (study the client's flowcharts, review internal control questionnaires, perform walk-through tests), assess planned control risk (authorization of purchases, segregation of duties, timely recording and independent review of transactions, authorization of payments), and determining the extent of testing of internal controls (identify the key internal controls and weaknesses and assesses control risk, perform tests of controls to obtain evidence that controls are operating effectively.
Segregation of duties: The purchasing function should be segregated from the requisitioning and receiving functions (if one individual is responsible for the requisition, purchasing, and receiving functions, fictitious purchases can be made. This can result in the theft of goods and possibly payment for unauthorized purchases. The invoice-processing function should be segregated from the accounts payable function (if one individual is responsible for the invoice-processing and accounts payable function, purchase transactions can be processed at the wrong price of terms or a cash disbursement can be processed for goods not received; this can result in overpayment of goods or the theft of cash), the disbursement function should be segregated from the accounts payable function (if one individual is responsible for the disbursement function and also has access to the accounts payable records, unauthorized checks supported by fictitious documents can be issued and unauthorized transactions can be recorded; this can result in theft of the entity's cash), and the accounts payable function should be segregated from the general ledger function (if one individual is responsible for the accounts payable records and also for the general ledger that individual can conceal any defalcation that would normally be detected by reconciling subsidiary records with the general ledger control account.
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