1 / 12

Learning Objectives

Learn about the purchases, payables, and payments process, including risks, transactions, account balances, controls, and auditor's assessment and tests for control and substantive procedures.

friedaf
Download Presentation

Learning Objectives

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Learning Objectives LO1 Describe the purchases, payables, and payments process, including typical risks, transactions, account balances, source documents, and controls. LO2 Describe the auditor’s control risk assessment and control tests for auditing control over the purchase of inventory, services, and fixed assets, and for the disbursement of cash. LO3 Describe the typical substantive procedures used to respond to the assessed risk of material misstatement in the main account balance and transactions in the purchases, payables, and payments process.

  2. 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. LO1

  3. 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. LO1

  4. 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. LO1

  5. Start Here Purchase, Payables and Payment Process Request for purchases Cash disbursement Enter accounts payable Receive goods and services Receive vendor invoice LO1

  6. Authorization Purchases are made by purchasing departments or authorized purchasers. • Purchasing controls such as competitive bids should be in place. 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. LO1

  7. 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. LO1

  8. Recording • Purchases should be recorded once the purchase order, receiving report, and vendor invoice are matched. • Disbursements are recorded when the cheques are prepared. LO1

  9. Periodic Reconciliation Periodic comparison of existing assets to recorded amounts in various accounts occurs in several ways. • Physical inventory is compared to the accounts. • Bank reconciliations are prepared. • Fixed assets are compared to the accounts. • A trial balance of accounts payable is compared to the control account. LO1

  10. Audit Evidence in Management Reports Computer processing of purchase and payment transactions will produce several management reports which may provide audit evidence: LO1

  11. Audit Evidence in Management Reports LO1

  12. Audit Evidence in Management Reports LO1

More Related