Chapter 19

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Audit of the Acquisition and Payment Cycle: Tests of Controls, Substantive Tests of Transactions, and Accounts Payable.

Chapter 19

©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder

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Learning Objective 1
Identify the accounts and the classes of transactions in the acquisition and payment cycle.

©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder

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Transactions in the Acquisition and Payment Cycle
1. Acquisitions of goods and services 2. Cash disbursements
3. Purchase returns and allowances and purchase discounts

©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder

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Accounts in the Acquisition and Payment Cycle
Cash in Bank Accounts Payable Cash Acquisitions disbursements of goods and services Purchase returns and allowances Purchase discounts Raw Material Purchases

Purchase Returns and Allowances

Property, Plant and Equipment

Purchase Discounts

Prepaid Expenses

©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder

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Accounts in the Acquisition and Payment Cycle
Manufacturing Expense Control Account Subsidiary accounts Repair and maintenance Taxes, Supplies Freight in, Utilities

Accounts Payable
Acquisitions of goods and services

Selling Expense Control Account
Subsidiary accounts Commissions Travel, delivery expenses Repairs, Advertising Administrative Expense Control Account Subsidiary accounts Supplies, Officers’ travel Legal fees Auditing fees, Taxes

©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder

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Learning Objective 2
Describe the business functions and the related documents and records in the acquisition and payment cycle.

©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder

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Classes of Transactions and Accounts
Acquisitions:
   

Inventory Property, plant, and equipment Prepaid expenses Leasehold improvements

 Accounts


payable

Manufacturing expenses



Selling and administrative expenses
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©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder

Classes of Transactions and Accounts
Cash disbursements:


Cash in bank (from cash disbursements) payable Purchase discounts

 Accounts 

©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder

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Business Functions in the Cycle
 Processing purchase orders  Receiving goods and services  Recognizing the liability  Processing and recording cash disbursements

©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder

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Related Documents and Reports
Processing purchase orders:
 Purchase requisition

 Purchase order
Receiving goods and services:  Receiving report

©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder

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Related Documents and Reports
Recognizing the liability:
 Vendor’s invoice

 Debit memo
 Voucher  Acquisitions transaction file

©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder

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Related Documents and Reports
Recognizing the liability:
 Acquisitions journal or listing

 Accounts payable master file
 Accounts payable trial balance  Vendor’s statement

©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder

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Related Documents and Reports
Processing and recording cash disbursements:
 Check

 Cash disbursements transaction file
 Cash disbursements journal or listing

©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder

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Learning Objective 3
Describe how e-commerce affects the acquisition of goods and service.

©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder

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How E-Commerce Affects the Acquisition and Payment Cycle
Internet-based technologies...
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