1 / 15

Chapters 8

Chapters 8. Acquisition and Expenditure Cycle. 1. Internal Control. Acquisition of Goods or Services separate functions: authorization, purchasing, receiving, custody, record keeping documents and records: purchase requisition, purchase order, receiving report.

taya
Download Presentation

Chapters 8

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. Chapters 8 Acquisition and Expenditure Cycle Chapters 8

  2. 1. Internal Control • Acquisition of Goods or Services • separate functions: authorization, purchasing, receiving, custody, record keeping • documents and records: purchase requisition, purchase order, receiving report Chapters 8

  3. 1. Internal Control (continued) • Controls over purchase of fixed assets • Acquired through acquisition cycle • Authorizations • Budget • Subsidiary ledger • Materiality • Capital v. revenue expenditures • Periodic physical inventory • Retirement Chapter 13

  4. Internal Control (continued) • Accounts Payable • steps: match all documents, check accuracy - compare numbers, code account distribution, approve for payment, record payable • documents and records: vendor’s invoice, voucher, voucher register, open purchase order file, unmatched receiving reports, unmatched vendor’s invoices, accounts payable trial balance, purchases journal Chapters 8

  5. Internal Control (continued) • Cash Disbursements • steps: pay from approved voucher, control check signing, mail payment, cancel voucher, record cash payment • documents and records: paid voucher file, cash disbursements journal • positive pay systems Chapters 8

  6. 2. Substantive Tests • Accounts Payable • Confirmations • Examine subsequent payments • Analytical procedures • Vouch transactions • Cutoff tests - purchases & cash disbursements • Reconcile recorded A/P to monthly statements • Examine unmatched receiving reports, purchase orders, and invoices • Recompute year-end accruals for accrued lia. Chapters 8

  7. 2. Substantive Tests (continued) • Accounts Payable • Existence and Occurrence • vouching, confirmation, cut-off tests, reconciling monthly statements • Rights and Obligations • vouching, confirmation • Completeness • examining subsequent payments, tracing, cutoff tests, confirmation, reconciling monthly statements, analytical procedures Chapters 8

  8. 2. Substantive Tests (continued) • Accounts Payable • Valuation • vouch recorded payables, confirmation • Presentation and Disclosure • compare statement presentation to GAAP • related party transactions, determine if any significant debit balances Chapters 8

  9. 2. Substantive Tests (continued) • Fixed Assets • Approach - tests of transactions • Vouch additions • Vouch disposals • Examine repairs and maintenance expense • Inspect assets • Search for unrecorded retirements • Examine title and/or tax statements • Test for impairments • Review depreciation • Examine lease contracts • Analytical procedures Chapter 13

  10. 2. Substantive Tests (continued) • Fixed Assets • Existence and Occurrence • observation, vouching additions, search for unrecorded retirements • Rights and Obligations • vouching, examine title and/or tax statements • Completeness • analytical procedures, examine title and/or tax statements, cut-off tests, review insurance coverage Chapter 13

  11. 2. Substantive Tests (continued) • Fixed Assets • Valuation • vouching transactions, review repairs and maintenance expense, test for impairments, review depreciation • Presentation and Disclosure • compare statement presentation to GAAP • related party transactions, pledged assets for loan, review gains/losses for proper presentation, review cost, BV, depreciation, useful lives for proper presentation Chapter 13

  12. 3. Frauds • Fraudulent disbursement schemes • Common and expensive frauds • Examples • fraudulent payments to shell company • duplicate payments • fraudulent payroll payments • personal purchases • expense reimbursements • check tampering Chapters 8

  13. 3. Frauds • Red flags • rounded amount invoices • amounts just below approval amounts • abnormal volume • sequential invoice numbers • photocopies of invoices • P.O. Boxes (with no other addresses) • no listed phone number • same vendor and employee addresses • multiple vendors at same location • examine services accounts Chapters 8

  14. Review Questions for Discussion • Chapter 8 8.1 8.2 8.5 8.7 8.9 8.10 8.11 8.12 8.15 Chapter 1

  15. Payroll Cycle • Functions • HR department • Hiring and firing • Supervision • Cost accounting • Payroll accounting • Check signing • Payroll distribution Chapters 8

More Related