Group IV Reporters

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Auditing the Expenditure Cycle

ENRIQUEZ, Jayson ESCOBEDO, Xybelle NARVAEZ. Juana Marie PAZ, Gene Kelly RED, Sunshine RENIVA, Leandra ROMANA, Fatima Bianca ULAYE, Vanessa

PURCHASES AND CASH DISBURSEMENT PROCEDURES : BATCH PROCESSING TECHNOLOGY Step 1: Data processing department – Inventory control • Purchasing Department Step 2: Data processing department – Purchase Order • Receiving Department Step 3: Data processing department – Batch update of inventory • Accounts Payable Step 4: Data processing department – Validates vendors • Cash Disbursement .

closes them and files documents .CASH DISBURSEMENT: BATCH PROCESSING Step 5: Data processing department – scans for items due and prints checks for items received Step 6: Cash disbursements department – reconciles checks. submits checks to management for signature Step 7: Accounts payable – matches copies of checks with open vouchers.

CASH DISBURSEMENT: REENGINEERED– FULLY AUTOMATED Receiving Department • Goods arrive at receiving department • Quantities received are entered on P.O per item .

ADVATAGES OF BATCH AUTOMATED SYSTEM OVER MANUAL BATCH -Improved inventory control -Better cash management -Less time lag -Better purchasing time management -Reduction of paper documents .

CONTROL IMPLICATIONS Segregation of duties Accounting records and access controls .REENGINEERED SYSTEM.

• General expenditure and cash procedures are designed to disbursements accommodate relatively systems to do payroll smooth flow of transactions .PAYROLL PROCEDURES • General expenditure procedures that apply to all vendors will not apply to employees • Writing checks to employees DRAWBACKS to requires special controls using regular A.P.

.REENGINEERED PAYROLL SYSTEM -Often integrated within the Human Resource Management System (HRM) Human Resource Management System (HRM) • captures and processes a wide range of personnel-related data.

electronically Direct access to files are used for data storage Many processes are now performed in real time .REENGINEERED PAYROLL SYSTEM -Differs from simple automate system in the following ways: Operations departments transmit transactions to D.P.

REENGINEERED PAYROLL SYSTEM .Key Operating Features: Personnel Cost accounting Timekeeping Data processing .

EXPENDITURE CYCLE AUDIT OBJECTIVES Output Control Process Control Input Control .

EXPENDITURE CYCLE AUDIT OBJECTIVES Input control • Data validation controls • Testing validation controls • Batch controls • Testing batch controls • Purchases authorization controls • Testing purchases authorization controls • Employee authorization • Testing employee authorization procedures .

subsidiary file • Employees with access to attendance records • Employees with access to both cash and A.P.EXPENDITURE CYCLE AUDIT OBJECTIVES Process controls File update controls Access controls • Risks specific to expenditure cycle: • Employees with access to A.P. records • Employees with access to both inventory and inventory records Testing access controlsPhysical controls • Purchase system controls • Payroll system controls Testing of physical controls .

EXPENDITURE CYCLE AUDIT OBJECTIVES Output controls • Accounts payable change report • Transaction logs • Transaction listing • Logs of automatic transactions • Unique transaction identifiers • Error listing • Testing output controls .

Understanding Data • File structures: • Inventory file • Purchase order file • Purchase order line item file • Receiving report file • Disbursement voucher file .EXPENDITURE CYCLE SUBSTANTIVE TESTS Expenditure Cycle Risks and Audit Concerns • Potential for understatement of liabilities and related expenses.

Rights and Obligations Assertions • • • • Searching for unrecorded liabilities Searching for unauthorized disbursement vouchers Review of multiple checks to vendors Auditing payroll and related records .EXPENDITURE CYCLE SUBSTANTIVE TESTS Testing Accuracy and Completeness Assertions Review Disbursement Vouchers for Unusual Trends And Exceptions • Accurate invoice prices Testing Completeness. Existence.

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