Chapter Eleven: Audit of Acquisition Cycle & Inventory

Chapter Eleven: Audit of Acquisition Cycle & Inventory

Chapter 11 Audit of Acquisition Cycle and Inventory Audit of the Acquisition Cycle Five Phases in Acquisition and Payment Process Authorized requisition Authorized purchase

Receipt of goods and services Approval for payment Cash disbursement Authorized Purchase Separate purchasing function promotes efficiency and effectiveness

eliminates potential favoritism reduces the opportunity for fraud centralizes control in one function Testing Controls over Accounts Payable & Related Expenses Attribute sampling for some criteria Evidence of proper authorization Expense reimbursements

Other non-business expenses Substantive Tests of Accounts Payable Testing for completeness Accounts payable confirmations Testing subsequent disbursements Analytical review of related expense accounts Year-end cutoff tests Review of contracts for purchase commitments.

Audits of Expense Accounts Detailed test of expense accounts Analytical procedures of expense accounts Audit of Inventory and Cost of Goods Sold

Inventory is a complex accounting and auditing area because of: Diversity of items High volume Various accounting valuation methods Obsolete inventory Inventory Audits of inventories are complex because: Many frauds involve inflating inventory

Inventory easily transportable Multiple locations Difficulty identifying obsolete inventory Defective inventory Valuation Returned goods Diversity of products Complex valuation methods Internal Controls for

Inventory Well-conceived inventory control system should ensure all purchases authorized accounting system ensures timely, accurate, complete recording receipt of inventory properly accounted for cost accounting system up to date perpetual inventory system inventory reviewed for obsolescence

Internal Control for Inventory Well-conceived inventory control system should ensure management reviews and manages inventory new product introduction is controlled long term contracts are closely monitored Substantive Testing of

Inventory and Cost of Goods Sold Assertions and audit procedures for inventory: Existence:complete year-end physical inventory Completeness:cutoff tests Rights:review of long term contracts etc. Valuation:combination of direct tests & analytics Disclosure:review GAAP guidelines and client unusual circumstances

Recently Viewed Presentations

  • Photosynthesis Acquiring Energy From Light

    Photosynthesis Acquiring Energy From Light

    Photosynthesis Acquiring Energy From Light What is Photosynthesis? Click me Photosynthesis is a two stage process by which Light, Water and Carbon dioxide are used to make high energy compounds Glucose (carbohydrates).
  • Which factor would have the greatest effect on

    Which factor would have the greatest effect on

    Tyto alba—Common Barn Owl. Which organisms from the diagram at right are correctly paired with their nutritional roles? (1) hawk—decomposer & insect-eating bird—parasite (2) mouse—autotroph & flower seed—heterotroph (3) mountain lion—predator & bark beetle—herbivore ...
  • Chapter 1

    Chapter 1

    Stress and Human Health Feeling in Charge: The Importance of Perceived Control Langer and Rodin's (1977) nursing home study emphasizes the value of boosting people's feelings of control. Increasing the control felt by nursing home residents resulted in better health...
  • CENTRAL PROCESSING UNIT - mcu-turkey.com

    CENTRAL PROCESSING UNIT - mcu-turkey.com

    CENTRAL PROCESSING UNIT Written by: Gizem Gulsen INTRODUCTION The central processing unit is where all the calculations and logic operations take place. CPU performs data-processing operations. ... Model of Control Unit Registers A register is a group of flip-flops with...
  • The CABs of INFANT CPR By: Kimberlie Eidenire

    The CABs of INFANT CPR By: Kimberlie Eidenire

    The CABs of INFANT CPR By: Kimberlie Eidenire Physical Education Teacher M.A.S.T. Academy High School Infant An infant is considered a child under the age of 12 months. An infant has a much better chance of survival if CPR is...
  • The Newly Revised Vineland-3

    The Newly Revised Vineland-3

    Remember: The Vineland is an interview. You do not read the items to the parent. You ask a question that relates to the category and then probe for more detailed information if needed. The online administration provides 'Suggested Interview Questions'...
  • Supply Chain Management Systems - Siena

    Supply Chain Management Systems - Siena

    Supply Chain Management Systems Lindsey Palmiotto Deanna Nicastro What is Supply Chain Management? A cross functional system using information technology to help manage some of a company's key business processes such as those of its suppliers, customers, and other business...
  • Your role as Campus Security Authority under the

    Your role as Campus Security Authority under the

    Who is a CSA. What to report under Clery. What do we mean by Clery Geography? How to report and what to provide victims. CSA training requirements. Note: If you believe you've been wrongly identified as a CSA, contact your...