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Summary of Assertions, Possible Misstatements, Control Activities and Test of Controls for Purchase Transactions

Assertion Possible Misstatement Control Activity Test of Controls


Occurrence Purchase recorded Segregation of Observe and
goods or services duties. evaluate proper
not ordered or segregation of
received. duties.
Purchase not Test a sample of
recorded without vouchers for the
approved purchase presence of an
order and receiving authorized
report. purchase order and
receiving report; if
IT application,
examine application
controls.
Accounting for Review and test
numerical sequence client procedures
of receiving reports for accounting for
and vouchers. numerical sequence
of receiving reports
and vouchers; if IT
application,
examine application
controls.
Cancellation of Examine paid
documents. vouchers and
supporting
documents for
indication of
cancellation.
Completeness Purchase made but Accounting for Review clients
not recorded. numerical sequence procedures for
of purchase orders, accounting for
receiving reports, numerical sequence
and vouchers. of purchase orders,
receiving reports,
and vouchers; if IT
application,
examine application
controls.
Receiving reports Trace a sample of
matched to vendor receiving reports to
invoices and their respective
entered in the vendor invoices and
purchases journal. vouchers.
Trace a sample of
vouchers to the
purchases journal.
Assertion Possible Misstatement Control Activity Test of Controls
Authorization Purchase of goods Approval of Review clients
or services not acquisitions monetary limits
authorized. consistent with the authorization for
clients acquisitions.
authorization
monetary limits.
Approved purchase Examine purchase
requisition and requisitions or
purchase order. purchase orders for
proper approval; if
IT is used for
automatic ordering,
examine application
controls.
Purchase of goods Competitive Review clients
or services at bidding procedures competitive bidding
unauthorized prices followed. procedures.
or on unauthorized
terms.
Accuracy Vendor invoice Mathematical Recompute the
improperly priced accuracy of vendor mathematical
or incorrectly invoice verified. accuracy of vendor
calculated. invoice.
Purchase order Agree the
agreed to receiving information on a
report and vendors sample of voucher
invoice for product, packets for product,
quantity and price. quantity and price.

Purchase Vouchers Examine


transactions not reconciled to daily reconciliation of
posted to the accounts payable vouchers to daily
purchases journal listing. accounts payable
or the accounts report; if IT
payable subsidiary application,
records. examine application
controls.

Amounts from Daily postings to Examine


purchases journal purchases journal reconciliation of
not posted reconciled with entries in purchases
correctly to the postings to journal with entries
general ledger. accounts payable to accounts payable
subsidiary records. subsidiary records;
if IT application,
examine application
controls.
Voucher register or Review
accounts payable reconciliation of
subsidiary records subsidiary records
reconciled to to general ledger
general ledger control account; if
control account. IT application,
examine application
controls.
Vouchers Test a sample of
reconciled to daily daily
accounts payable reconciliations.
listing.
Cutoff Purchase All receiving reports Compare the dates
transactions forwarded to the in the receiving
recorded in the account payable reports with the
wrong period. department daily. dates on the
relevant vouchers.
Existence of Compare the dates
procedures that on vouchers with
require recording the dates they were
the purchases as recorded in the
soon as possible purchases journal.
after goods or
services are
received.
Classification Purchase Chart of Accounts Review purchases
transaction not journal and general
properly classified. ledger for
reasonableness.
Independent Examine a sample
approval and of vouchers for
review of accounts proper
charged for classification.
acquisitions.
Summary of Assertions, Possible Misstatements, Control Activities and Test of Controls for Cash Disbursement
Transactions

Assertion Possible Misstatement Control Activity Test of Controls


Occurrence Cash disbursement Segregation of Observe and
recorded but not duties. evaluate proper
made. segregation of
duties.
Vendor statements Review clients
independently procedures for
reviewed and reconciling vendor
reconciled to statements.
accounts payable
records.
Bank reconciliations Review bank
prepared and reconciliations for
reviewed regularly. indication of
independent
review.
Completeness Cash disbursement Segregation of Observe and
made but not duties. evaluate proper
recorded. segregation of
duties.
Management Examine and test
reviews listing of indication of
cash disbursement management
prior to release. reviews listing of
cash
disbursements.
Daily cash Review clients
disbursements procedures for
reconciled to reconciling daily
postings to cash disbursements
accounts payable with postings to
subsidiary records. accounts payable
subsidiary records;
if IT applications,
test application
controls.
Authorization Cash disbursement Segregation of Evaluate
not authorized. duties. segregation of
duties.
Electronic cash Examine indication
disbursements of approval on
transfers and voucher packet.
cheques prepared
only after all source
documents have
been independently
approved.
Individuals who Review and test
make electronic clients procedures
cash disbursements for authorization.
transfers and issue
cheques are
authorized to do so.
Accuracy Cash disbursement Daily cash Review
recorded at disbursement reconciliation.
incorrect amount. report reconciled to
electronic cash
disbursements
transfers performed
and cheques issued.
Vendor statements Review
reconciled to reconciliation.
accounts payable
and independently
reviewed.
Bank statements Review bank
regularly reconciled reconciliations.
and independently
reviewed.
Cash disbursement Vendor statements Review
posted to the reconciled and reconciliations.
wrong vendor independently
account. reviewed.
Cash disbursements Monthly cash Review postings
journal not disbursements from cash
summarized journal agreed to disbursements
properly or not general ledger journal to the
properly posted to postings. general ledger.
general ledger Accounts payable Review
accounts. subsidiary records reconciliation.
reconciled to
general ledger
control account.
Cutoff Cash disbursement Reconciliation of Review
recorded in wrong electronic funds reconciliations.
period. transfer and
cheques issued with
postings to the cash
disbursements
journal and
accounts payable
subsidiary records.
Classification Cash disbursement Chart of accounts. Review cash
charged to wrong disbursements
account. journal for
reasonableness of
account
distribution.
Independent Review general
approval and ledger account code
review of general on voucher packet
ledger account on for reasonableness.
voucher packet.
Summar of Assertions and related tests of transactions, Account Balances and Disclosures- Accounts Payable and
Accrued Expenses

Assertions about Classes of Transactions Substantive Test of Transactions


Occurrence Test a sample of vouchers for the presence of an
authorized purchase order and receiving report.
Completeness Tracing a sample of vouchers to the purchases
journal.
Authorization Test a sample of purchase requisition for proper
authorization.
Accuracy Recompute the mathematical accuracy of sample
vendors invoices.
Cutoff Compare dates on a sample of vouchers with the
dates transactions were recorded in the purchases
journal.
Classification Verify classification of charges for a sample of
purchases transactions.
Assertions about Account Balances Test of Details of Account Balances
Existence Vouch selected amounts from the accounts
payable listing and schedules for accruals to
voucher packet or other supporting
documentation.
Obtain selected vendors statements and reconcile
to vendor accounts.
Confirmation of selected accounts payable.
Rights and Obligations Review voucher packets for presence of purchase
requisition, purchase order, receiving report and
vendor invoice.
Completeness Obtain listing of accounts payable and agree total
to general ledger.
Valuation and Allocation Obtain listing of accounts payable and account
analysis schedules for accruals; foot listing and
schedules and agree totals to general ledger.
Trace selected items from the accounts payable
listing to the subsidiary records and voucher
packets.
Review results of confirmations of selected
accounts payable.
Obtain selected vendors statements and reconcile
to vendor accounts.
Assertions about Presentation and Disclosure Tests of Details of Disclosures
Occurrence and rights and obligation Inquire about accounts payable and accrued expenses to
ensure that they are properly disclosed.
Completeness Complete financial reporting checklist to ensure that all
financial statement disclosures related to accounts payable
and accrued expenses have been disclosed.
Classification and understandability Review of listing of accounts payable for material debits,
long-term payables and non-trade payables. Determine
whether such items require separate disclosure on the
balance sheet.
Read notes to ensure that required disclosures are
understandable.
Accuracy and valuation Read notes and other information to ensure that the
information is accurate and properly presented at the
appropriate amounts.