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AUDIT PROGRAM

Accounts Payable

Assertion Objective Procedures


Valuation or To determine if the  Enter fictitious payables into the system. Process it using the
Allocation amounts recorded for clients system and compare the result with the expected output.
accounts payable have  Obtain a listing of accounts payable, foot the listing, and agree
been recorded it to the general ledger control account.
correctly.  Trace selected vouchers or 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 with posting to the
accounts payable subsidiary records.
Completeness To determine if all  Ask management about control activities used to identify
transactions affecting unrecorded payables.
accounts payable that  Confirm vendor accounts, including accounts with small or zero
should have been balances.
recorded are recorded.  Vouch large monetary items from the purchases journal and
cash disbursements journal for a limited time after year-end.
 Examine the files of unmatched purchase orders, receiving
reports, and vendor invoices for any unrecorded payables.
 Examine and test the client’s procedures for reviewing vendor
payments lists.
Cut-off To determine if all  Compare the date on receiving report with the date on the
transactions affecting vendor’s invoice.
accounts payable have  Compare the date of the invoice with the date they were
been recorded in the recorded in the accounts payable journal.
correct accounting  Tracing dated receiving reports to voucher register entries and
period. vouch recorded entries to supporting documentation.
AUDIT PROGRAM
Cash

Assertion Objective Procedures


Valuation or To determine if the  Reconcile the total of electronic cash disbursements transfer
Allocation amounts recorded for and the checks issued each day with the daily cash
cash have been disbursements report.
recorded correctly.  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.
Completeness To determine if all  Examine the sequence of checks in the check register.
disbursements of cash  Ask management about control activities used to identify
are recorded. 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.
Existence or To determine if  Examine outstanding checks list to determine that checks are
Occurrence recorded cash being processed promptly.
disbursements have  Examine if check issuances contain valid signatures.
occurred.  Perform a cash count for cash on hand.
AUDIT PROGRAM
Purchases

Assertion Objective Procedures


Occurrence To determine if  The quantity and quality of goods and services received is
purchases recorded by documented and agrees with the requisition and performance
the entity have expectations such as service level agreements, contract terms,
occurred. 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.
Completeness To determine if all  Create dummy purchases. Click “New Purchase Order” and
purchases are enter the details. Click “Convert to Purchase Invoice” then
recorded. “Update”. Look into the “Purchase Invoices” if the 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.
Valuation or To determine if the  Recompute the mathematical accuracy of vendor invoice.
Allocation amounts recorded for  Agree information in the sample of vouchers for product,
purchases have been quantity and price.
recorded correctly.  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 Objective Procedures


Rights and Obligation To determine if the entity has the right  Examine vendor’s invoices for terms of
over the purchase discount. the purchase, including the discount
rate and the discount period.
Valuation or Allocation To determine if purchase discounts  Enter dummy purchases with discounts
are recorded in the correct amount. 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.
Completeness To determine if all purchase discounts  Obtain a sample of invoices and
are recorded. 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 Objective Procedures


Valuation or Allocation To determine if purchase returns and  Review the quantity and prices of goods
allowances are recorded in the correct returned to vendors.
amount.  Recompute the mathematical accuracy
of allowances and adjustments to
purchases.
 Examine reconciliation of vouchers to
daily accounts payable report.
Completeness To determine if all purchase returns  Review the use and authorization of
and allowances are recorded. 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.
Existence or Occurrence To determine if purchases recorded  Observe and evaluate proper
by the entity have occurred. segregation of duties.
 Examine vouchers and supporting
documents for indication of cancellation.