AUDITING THE EXPENDITURE CYCLE

PURCHASES AND CASH DISBURSEMENT PROCEDURES USING . BATCH PROCESSING TECHNOLOGY Data Processing

Department: Step 1 Processing Departmento 5 part purchase ordero 3 alternatives for authorizing and ordering inventories

DPD: Step 2 Receiving Department

DPD: Step 3 Accounts Payable

DPD: Step 4 Cash Disbursemento Data Processing Departmento Cash Disbursements Departmento Accounts Payable

REENGINEERING THE PURCHASES/CASH DISBURSEMENT . SYSTEM

Data Processing Receiving Department Accounts Payable

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 Access Controls

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

Reengineering the Payroll System Human Resource Management (HRM) System

Key Features: Personnel Cost Accounting Timekeeping Data Processing

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 Authorization Procedures

Process Controls File Update Controlso Sequence Check Controlo Liability Validation Controlo Valid Vendor Fileo Testing File Update Controls

Access Controls Testing Access Controls Physical Controlso Purchases System Control• Segregation of inventory control from the warehouse

• 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

Testing Physical Controls

Output Controls Accounts Payable Change Report

Transaction Logs Transaction Listing Log of Automatic Transactions

Unique Transaction Identifiers

Error Listing Testing Output Controls

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

Testing the Accuracy and Completeness Assertions

Review Disbursement Vouchers for Unusual Trends and Exceptions Stratify Classify

Reviewing for Accurate Invoice Prices Join

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