Chapter 11
Auditing the Purchasing Process:
- Expense and Liability Recognition
- Overview of the Purchasing Process
- Inherent Risk Assessment
- Control Risk Assessment
- Control Activities and Tests of Controls Purchase Transactions
- Control Activities and Tests of Controls- Cash Disbursement Transactions
- Control Activities and Tests of Controls- Purchase Return Transactions
- Relating the Assessed Level of Control Risk to Substantive Procedures
- Auditing Accounts Payable and Accrued Expenses
- Substantive Analytical Procedures
- Tests of Details of Classes of Transactions, Account Balances, and Disclosures
- Accounts Payable Confirmations
- Evaluating the Audit Findings Accounts Payable and Related
Quick Synopsis:
The process of auditing the purchasing process entails several key steps. It commences with the planning phase, during which the auditor delineates the audit’s scope and objectives. Subsequently, the auditor endeavors to acquire a comprehensive understanding of the purchasing process, encompassing the examination of pertinent policies, procedures, and controls in place. In order to identify potential risks that might impact the financial statements, a rigorous risk assessment is conducted. The auditor then proceeds to test the efficacy of internal controls, including the segregation of duties and authorization procedures. This entails scrutinizing the documentation associated with the purchasing process, such as purchase orders, invoices, and contracts, in order to ensure accuracy and compliance. Additionally, the auditor analyzes purchasing transactions to detect any irregularities or anomalous patterns that may be indicative of impropriety.
Another crucial aspect of the auditing process involves verifying the authenticity and validity of vendor relationships. This necessitates a thorough review of contracts, invoices, and external inquiries. In certain instances, the auditor may also undertake physical inventory counts to reconcile them with the recorded amounts. Moreover, the auditor conducts a comprehensive review and analysis of expense accounts that are linked to the purchasing process, with the aim of identifying any potential anomalies.
Ultimately, the auditor synthesizes their findings into a comprehensive report that encapsulates their observations, including any identified control weaknesses or recommendations for improvement. This report serves as a valuable tool for enhancing the overall effectiveness and efficiency of the purchasing process.
Assignment Instructions:
- You are to prepare a 2-3 page paper discussing the risks associated with a SPECIFIC assertion or account balance related to a given process, the audit procedures you used to test that assertion or account balance, what evidence you used, and if you feel it was adequate in light of that test, and how you concluded if the evidence was adequate. The paper should be submitted as a Word document.
- To help the class learn the material, you are to prepare a class presentation of the key audit points related to that process and use the information you wrote about in your paper to demonstrate the audit process for the given area. Your presentation should be done as a narrated PowerPoint. You can also provide supplemental material as handouts for the class. YOU ARE THE TEACHER for that specific audit topic.
Professional PowerPoint presentation Resource:
