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Acquistion and Payment Cycle

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Acquisition and Payment Cycle – Audit Program Design Part II Acquisitions General: 1. )Review purchase and expenditure procedures with accounts payable personnel, receiving personnel, cashier, and vice president of finance department. 2. )Examine general ledger for large and unusual disbursement amounts. 3. )Determine whether purchases greater than $5,000 have additional approval. Audit Objective:Recorded acquisitions are for goods and services received. 1. )Examine documents in voucher package for existence. 2. )Agree documents in voucher package to each other. 3. Examine indication of cancellation on voucher package and disbursement voucher.

4. )Examine indication of internal verification (receiving clerk’s signature on receiving report). 5. )Examine other underlying documents in voucher package for reasonableness and authenticity. 6. )Examine vendor master file for unusual vendors. 7. )Trace inventory acquisitions to inventory master file. 8. )Examine fixed assets acquired. Audit Objective:Existing acquisitions transactions are recorded. 1. )Account for a sequence of purchase orders. 2. )Account for a sequence of receiving reports. . )Account for a sequence of disbursement vouchers. 4. )Trace receiving reports to the inventory journal. 5. )Trace vendors’ invoices to the accounts payable master file.

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Audit Objective:Recorded acquisition transactions are accurate. 1. )Examine indication of approval. 2. )Compare recorded transactions in the inventory journals with the voucher package and other supporting documentation. 3. )Recalculate the clerical accuracy on the vendors’ invoices. Audit Objective:Acquisitions transactions are properly classified.

1. )Examine procedures manual and chart of accounts. . )Examine indication of internal verification. 3. )Compare classification with chart of accounts by referring to vendors’ invoices. Audit Objective:Acquisition transactions are recorded on the correct dates. 1. )Examine procedures manual and observe whether unrecorded vendors’ invoices exist. 2. )Compare dates of receiving reports and vendors’ invoices with dates in the accounts payable journal. Audit Objective:Acquisition transactions are properly included in the accounts payable and inventory master files and are properly summarized. 1. Examine indication of internal verification. 2. )Test clerical accuracy by footing the journals and tracing posting to general ledger, accounts payable, and inventory master files. Cash Disbursements Audit Objective:Recorded cash disbursements are for goods and services actually received. 1. )Discuss segregation of duties with personnel. 2. )Discuss disbursement approval with Vice President of Finance. 3. )Review approval on cash disbursement vouchers. 4. )Review the general ledger and accounts payable master files for large or unusual amounts. . )Trace canceled check to related journal entry and compare vendor name and amount. 6. )Examine canceled check for authorized signature, proper endorsement, and cancellation by the bank. Audit Objective:Existing cash disbursements are recorded.

1. )Account for a sequence of checks. 2. )Examine bank reconciliations and observe their preparation. 3. )Trace cash disbursements to bank statements. Audit Objective:Recorded cash disbursement transactions are accurate. 1. )Examine indication of internal verification of calculations. . )Compare receiving report to purchase order. 2. )Determine whether bank reconciliations are performed by an independent employee. 3. )Recalculate invoice amounts and trace to the general ledger. Audit Objective:Cash Disbursement transactions are properly classified. 1. )Examine chart of accounts. 2. )Compare classification on chart of accounts to vendors’ invoices. Audit Objective:Cash disbursement transactions are recorded on the correct date. 1. )Observe whether there are unrecorded checks. 2. Compare date on canceled checks with recorded date in general ledger. 3. )Compare date on canceled check with date of cancellation by bank. Audit Objective:Cash disbursement transactions are properly included in the accounts payable master file and are properly summarized. 1. )Test clerical accuracy by footing journals. 2. )Trace journal postings to general ledger and accounts payable master file. References Arens, A. A. , Elder, R. J. &, Beasley, M. S. (2006). Auditing and assurance services: An integrated approach (11th ed. ). New York: Pearson.

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Acquistion and Payment Cycle. (2016, Oct 15). Retrieved from https://graduateway.com/acquistion-and-payment-cycle/

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