PURCHASES TRANSACTIONS
TESTS OF CONTROLS (IWORI)
Controls
1. Approval of acquisitions is
evidenced by signatures on the
purchase order.
2. A purchase requisition, PO, RR and
VI are filed in support of each
acquisition.
3. Documents are canceled so they
cannot be reused.
4. Receiving reports and Vouchers are
pre-numbered and accounted for.
Potential
Misstatements
Purchases that did not occur may be
recorded.
Purchases that did not occur may be
recorded.
Documents may be reused, and
acquisitions may be recorded twice.
Purchases maybe unrecorded.
Audit Procedures Test
of Controls
Examine approval signature.
Observe procedure or examine file of
documents.
Recorded acquisitions are for items
Examine cancellations on documents.
Observe procedure.
Account for a numerical sequence.
Acquisitions that occurred are
SUBSTANTIVE TESTS (VICTORIA)
ASSERTIONS Substantive test of transactions Substantive test of details of balances Analytical Procedures
Potential Substantive Audit Substantive Audit
Assertions Analytical Procedures
Misstatements Procedures Procedures
Purchases that did not occur may be Examine underlying documents for Analytical procedures also provide evidence about the completeness of
recorded. Documents may be reused, authenticity and reasonableness. Scan purchases and accounts payable.
and acquisitions may be recorded voucher register for large or unusual
Existence/ twice. items. Inspect acquired PPE. Trace Auditors compare current-year individual accounts payable and expense
inventory purchased to perpetual account balances with previous year balances, and they compare the ratios of
Occurrence records. Scan voucher register for the purchases to accounts payable and the ratios of AP to the current liabilities
duplicate payments. with previous year ratios.
that were acquired.
Purchases may be unrecorded. Trace a sequence of receiving reports All purchases and accounts payable 1. Test cutoff to determine whether
to entries in the voucher register. Test transactions are recorded. purchases and accounts payable
cutoff. Account for a sequence of are recorded properly.
entries in the voucher register. 2. Reconcile accounts payable to
vendors’ statements and consider
the need for confirmations with
Completeness vendors.
3. Perform analytical procedures to
test purchases and accounts
recorded. payable.
4. Perform a search for unrecorded
liabilities.
5. Receiving reports are pre-
numbered by persons having access
only to a blind copy of purchase order
details. Consigned goods are readily
identified.
6. For all goods shipped, goods are
counted and descriptions and
quantities are compared to quantities
and descriptions on sales orders and
shipping documents prior to shipping.
7. Chart of accounts adequately
describes accounts to be debited.
Account coding is assigned by one
person and checked by another.
Purchase that are not legitimate
business purchases may be recorded
and paid, or consigned goods may be
recorded as a purchase.
Client could overpay for goods or
services.
Purchases may be charged to wrong
accounts.
Observe procedure.
Rights
& obligations
Recorded acquisitions are the
entity’s purchases and liabilities.
Examine voucher for signature Client could overpay for goods or Recompute invoices and compare Transactions are recorded at their 5. Verify the mathematical accuracy
indicating performance. services. invoice price to purchase order. proper amounts. of vouchers payable listing and
Valuation/ trace the balance to the general
ledger.
Measurement
Acquisitions are recorded for the
proper amounts.
Examine chart of accounts. Purchases may be charged to wrong Check accuracy of accounts on Accounts payable are properly 6. Determine whether accounts are
Examine signature of employee
Presentation accounts. invoices by reference to chart of classified and disclosed. classified and disclosed in the FS in
performing check. & disclosure accounts. accordance with PFRS.
Acquisitions are recorded to result in
presentation and disclosure in
accordance with PFRS.