AUDIT PROGRAM for Cash Disbursements 2

AUDIT PROGRAM Accounts Payable Assertion Valuation or  Allocation

Objective To determine if the amounts recorded for accounts payable have been recorded correctly.

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Completeness

To determine if all transactions affecting accounts payable that should have been recorded are recorded.

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Cut-off

To determine if all transactions affecting accounts payable have been recorded in the correct accounting period.

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Procedures Enter fictitious fictitious payables payables into the system. system. Process it using the clients system and compare the result with the expected output. Obtain a listing of accounts payable, foot the listing, and agree it to the general ledger control account. Trace selected vouchers vouchers or vendor vendor accounts to the supporting documents or subsidiary accounts payable records to verify the accuracy of the details. Obtain copies of vendors’ monthly statements and reconcile the amounts to the client’s accounts payable records. Reconcile the daily cash disbursements disbursements with with posting to the accounts payable subsidiary records. Ask management about control activities used to identify unrecorded payables. Confirm vendor accounts, accounts, including accounts accounts with small small or zero balances. Vouch large monetary items from the purchases journal and cash disbursements journal for a limited time after year-end. Examine the files of of unmatched unmatched purchase purchase orders, receiving reports, and vendor invoices for any unrecorded payables. Examine and test the client’s procedures for reviewing vendor payments lists. Compare the date on receiving receiving report with the date on the vendor’s invoice. Compare the date of the invoice with with the date they were recorded in the accounts payable journal. Tracing dated receiving receiving reports to voucher voucher register register entries and vouch recorded entries to supporting documentation.

AUDIT PROGRAM Cash Assertion Valuation or  Allocation

Objective To determine if the amounts recorded for cash have been recorded correctly.

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Completeness

To determine if all disbursements of cash are recorded.

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Existence or Occurrence

To determine if recorded cash disbursements have occurred.

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Procedures Reconcile the total of electronic cash disbursements transfer and the checks issued each day with the daily cash disbursements report. Foot the total of the cash disbursements journal and verify if it agrees with the underlying accounting records and the general ledger control account balance. Perform a bank reconciliation and account for any differences. Review the reconciliation of payment transfers with postings to the cash disbursements journal and accounts payable subsidiary records. Enter fictitious disbursements of cash into the system. Click “Pay money to Supplier” button. Enter the details. Process it using the clients system. Go to “Reports” and examine if the dummy transactions are reflected in correct amount. Examine the sequence of checks in the check register. Ask management about control activities used to identify unrecorded disbursements. Vouch large monetary items from the purchases journal and cash disbursements journal. Examine and test the client’s procedures for reviewing vendor payments lists. Examine outstanding checks list to determine that checks are being processed promptly. Examine if check issuances contain valid signatures. Perform a cash count for cash on hand.

AUDIT PROGRAM Purchases Assertion Occurrence

Objective To determine if purchases recorded by the entity have occurred.

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Completeness

To determine if all purchases are recorded.

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Valuation or  Allocation

To determine if the amounts recorded for purchases have been recorded correctly.

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Procedures The quantity and quality of goods and services received is documented and agrees with the requisition and performance expectations such as service level a greements, contract terms, and vendor performance. Observe and evaluate proper segregation of duties. Test a sample of vouchers for the presence of an authorized purchase order and receiving report. Examine paid vouchers and supporting documents for indication of cancellation. Create dummy purchases. Click “New Purchase Order” a nd enter the details. Click “Convert to Purchase Invoice” then “Update”. Look into the “Purchase Invoices” if th e purchases are recorded and updated. Review procedures for accounting for numerical sequence of purchase orders, receiving reports and vouchers. Trace a sample of receiving reports to their vendor invoices and vouchers. Trace a sample of vouchers to the purchases journal. Recompute the mathematical accuracy of vendor invoice. Agree information in the sample of vouchers for product, quantity and price. Examine reconciliation of vouchers to daily accounts payable report. Enter fictitious purchases into the system. Process it using the clients system and compare the result on the “Reports” with the expected output.

AUDIT PROGRAM Purchase Discounts Assertion Rights and Obligation

Objective To determine if the entity has the right over the purchase discount.

Valuation or Allocation

To determine if purchase discounts are recorded in the correct amount.

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Completeness

To determine if all purchase discounts are recorded.

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Procedures Examine vendor’s invoices for terms of the purchase, including the discount rate and the discount period. Enter dummy purchases with discounts and examine if the discounts are stated in the correct amount. Recompute the mathematical accuracy of discounts granted by the vendor. Agree information in the sample of vouchers for product, quantity and price. Obtain a sample of invoices and vouchers, and trace to the purchases  journal if discounts are recorded. Trace a sample of receiving reports to their vendor invoices and vouchers.

AUDIT PROGRAM Purchase Returns and Allowances Assertion Valuation or Allocation

Objective To determine if purchase returns and allowances are recorded in the correct amount.

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Completeness

To determine if all purchase returns and allowances are recorded.

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Existence or Occurrence

To determine if purchases recorded by the entity have occurred.

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Procedures Review the quantity and prices of goods returned to vendors. Recompute the mathematical accuracy of allowances and adjustments to purchases. Examine reconciliation of vouchers to daily accounts payable report. Review the use and authorization of debit memoranda for purchase returns and allowances. Examine the accounts payable journal if the returns and allowances are reflected. Create fictitious returns and allowances and look into the reports if the returns and allowances are updated. Observe and evaluate proper segregation of duties. Examine vouchers and supporting documents for indication of cancellation.