Auditing the expenditure cycle
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The document outlines an auditing process for the expenditure cycle, focusing on purchasing and cash disbursement procedures using batch processing technology. It emphasizes the reengineering of the purchases/cash disbursement system and payroll system for improved inventory control, cash management, and transaction efficiency while ensuring proper controls and validations. Additionally, it details various input, process, and output controls along with tests necessary for maintaining accuracy and completeness in financial operations.
Auditing the expenditure cycle
- 1. AUDITING THE EXPENDITURE CYCLE
- 2. PURCHASES AND CASH DISBURSEMENT PROCEDURES USING . BATCH PROCESSING TECHNOLOGY Data Processing Department: Step 1 Processing Department o 5 part purchase order o 3 alternatives for authorizing and ordering inventories DPD: Step 2 Receiving Department
- 3. DPD: Step 3 Accounts Payable DPD: Step 4 Cash Disbursement o Data Processing Department o Cash Disbursements Department o Accounts Payable
- 4. REENGINEERING THE PURCHASES/CASH DISBURSEMENT . SYSTEM Data Processing Receiving Department Accounts Payable
- 5. The Automated System Improved Inventory Control Better Cash Management Less Time Lag Better Purchasing Time Management Reduction of Paper Documents The Reengineered System Segregation of Duties Accounting Records and
- 6. OVERVIEW OF PAYROLL PROCEDURES General expenditure procedures that apply to all vendors will not apply to employees Writing checks to employees requires special controls General expenditure procedures are designed to accommodate a relatively smooth flow of transactions
- 7. Reengineering the Payroll System Human Resource Management (HRM) System Key Features: Personnel Cost Accounting Timekeeping Data Processing
- 8. EXPENDITURE CYCLE AUDIT OBJECTIVES, CONTROLS, AND . . TESTS OF CONTROLS Input Controls Data Validation Controls Testing Validation Controls Batch Controls Testing Batch Controls Purchases Authorization Controls Testing Purchases Authorization Controls Employee Authorization Testing Employee
- 9. Process Controls File Update Controls o Sequence Check Control o Liability Validation Control o Valid Vendor File o Testing File Update Controls Access Controls Testing Access Controls Physical Controls o Purchases System Control • Segregation of inventory control from the warehouse
- 10. • Segregation of the general ledger and AP from Cash Disbursements • Supervision of Receiving Department • Reconciliation of Supporting Documents o Payroll System Controls • Verification of Time Cards • Supervision • Paymaster • Payroll Imprest Account
- 11. Output Controls Accounts Payable Change Report Transaction Logs Transaction Listing Log of Automatic Transactions Unique Transaction Identifiers Error Listing Testing Output Controls
- 12. SUBSTANTIVE TESTS OF EXPENDITURE CYCLE ACCOUNTS Inventory File Purchase Order File Purchase Order Line Item File Receiving Report File Disbursement Voucher File and Check Register File
- 13. Testing the Accuracy and Completeness Assertions Review Disbursement Vouchers for Unusual Trends and Exceptions Stratify Classify Reviewing for Accurate Invoice Prices Join
- 15. Testing the Completeness, Existence, and Right and Obligations Assertions Searching for Unrecorded Liabilities Searching for Unauthorized Disbursement Vouchers Review for Multiple Checks to Vendors Auditing Payroll and Related Accounts