Audit Study Guide Essay
Chapter 19: Audit of the Acquisition and Payment Cycle: * Be able to identify accounts that will likely be affected by weak internal I/C.
ACCOUNTS PAYABLE flows into:
-cash in bank / Raw material purchases
-purchase R&A / PPE
-purchase disc / Prepaid Expenses
….which then flows into Manufacturing/Selling/Admin Expense Control Accounts
CLASSES OF TRANSACTIONS/ACCOUNTS Acquisitions: Cash Disbursements: * Inventory -Cash in bank (from cash disbursements) * Property, plant, and equipment -Accounts Payable * Prepaid expenses -Purchase Discounts * Leasehold improvements * Accounts payable * Manufacturing expenses * …show more content…
Design and perform analytical procedures for accounts payable.
Procedure Possible Misstatement
Compared acquisition-related Misstatement of AP and expenses expense account balances w/ prior years
Review list of AP for unusual, non-vendor Classification misstatement for nontrade liabilities. and interest-bearing payables
Compare individual APs with previous years. Unrecorded or nonexistent accounts, or misstatements
Calculate ratios, such as purchases/AP, or “ “