Part IV

A. B. C. D.
Key Transaction Related Test of Substantive Test
# Internal Control Audit Objectives Control of Transaction
1. Segregation of the Recorded acquisitions are for goods and Discuss Trace entries in the acquisitions
purchasing, receiving, services actually received (occurrence). segregation of journal to related vendors' invoices,
and cash Recorded cash disbursements are for duties with receiving reports, and purchase
disbursements goods and services actually received personnel and orders.
functions. (occurrence). observe activities.

2. Independent Existing cash disbursement transactions Examine file Reconcile recorded cash
reconciliation of the are recorded (completeness). of completed disbursements with the cash
monthly bank Recorded cash disbursement transactions bank disbursements on the bank
statements. are stated at the correct amounts reconciliations. statement (proof of cash
(accuracy). disbursements).

3. Use of pre-numbered Existing acquisition transactions are Account for Trace from a file of vendors'
voucher packages, recorded (completeness). a sequence invoices to the acquisitions journal.
properly accounted of voucher
for. packages.
4. Use of pre-numbered Existing cash disbursement transactions Account for Reconcile recorded cash
checks, properly are recorded (completeness). a sequence disbursements with the cash
accounted for. of checks. disbursements on the bank
statement (proof of cash
disbursements).
5. Use of pre-numbered Existing acquisition transactions are Account for a Trace from a file of receiving
receiving reports, recorded (completeness). sequence of reports to the acquisitions journal.
properly accounted receiving reports.
for.
 A. B. C. D.
Key Transaction Related Test of Substantive Test
# Internal Control Audit Objectives Control of Transaction
6. Internal verification  Recorded acquisitions are for goods Examine Examine supporting documents
of document package and services actually received document for propriety and recompute
before check (occurrence). package for information on the supporting
preparation.  Recorded acquisitions are stated at indication of documents.
the correct amounts (accuracy). internal
 Acquisition transactions are properly verification.
included in the master files, and are
properly summarized (posting and
summarization).
 Acquisitions are properly classified
(classification).
 Acquisitions are recorded on the
correct dates (timing).
7. Review of supporting Recorded cash disbursements are for Examine checks Trace the cancelled check to the
documents and goods and services actually received for signature. related acquisitions journal entry
signing of checks (occurrence). and examine for payee name and
by an independent, amount.
authorized person.
8. Cancellation of Recorded acquisitions are for goods and Examine Examine the acquisitions journal
documents prior to services actually received (occurrence). indication of for duplicate entries to a vendor.
signing of the check. cancellation.
9. Monthly  Acquisition transactions are properly Inquire of client Foot acquisitions and cash
reconciliation of the included in the master files, and are about monthly disbursements journals and trace
accounts payable properly summarized (posting and reconciliation postings to the general ledger and
master file with the summarization). procedures. accounts payable and inventory
general ledger.  Cash disbursement transactions are master files.
properly included in the master file,
and are properly summarized (posting
and summarization).
E.

TRANSACTION-RELATED
AUDIT OBJECTIVES SUBSTANTIVE AUDIT PROCEDURES
Occurrence  Compare prices on vendor invoices with approved price limits established by management.
 Review the acquisitions journal, general ledger, and accounts payable master file for large or
unusual amounts.
Completeness  Trace a sample of receiving reports to the acquisitions journal.
 Trace from a file of vendors' invoices to the acquisitions journal.
 Trace from additions in perpetual inventory records to recorded acquisitions.
Accuracy  Compare amounts for entries in acquisitions journal to related vendors' invoices, purchase
orders and receiving reports.
 Recompute information on vendor invoices.
 Compare prices on vendor invoices with approved price limits established by management.
Posting and  Trace individual entries in accounts payable master file to acquisitions journal.
Summarization
Classification  Examine vendors' invoices for proper classification.
 Compare classification with chart of accounts by reference to vendors' invoices.
Timing  Compare dates of receiving reports and vendors' invoices with dates in the acquisitions
journal.
F.

TRANSACTION-
RELATED AUDIT
OBJECTIVES SUBSTANTIVE AUDIT PROCEDURES
Occurrence  Trace cancelled check numbers in the cash disbursements journal to related
cancelled checks and examine for payee, name, and amount.
 Examine cancelled check for authorized signature, proper endorsement, and cancellation
by the bank.
 Review the cash disbursements journal, general ledger, and accounts payable master file for
large or unusual amounts.
 Trace cancelled check to the related acquisitions journal entry and examine for payee name and
amount.
Completeness  Trace entries in acquisitions journal to subsequent payment in cash disbursements journal.
Accuracy  Compare cancelled checks with the related acquisitions journal and cash disbursements journal
entries.
 Recompute cash discounts.
Posting and Summarization  Trace individual entries in accounts payable master file to cash disbursements journal.
Classification  Compare classification with chart of accounts by reference to vendors' invoices and acquisitions
journal.
Timing  Compare dates on cancelled checks with cash disbursements journal.
 Compare dates on cancelled checks with the bank cancellation date.
G. Prepare a performance audit program for acquisition and cash disbursement using all audit
procedures in requirements through f. Eliminate any duplicate audit process.