Acquisition Payment Cycle

Acquisition and Payment daily round According to Arens, Elder and Beasley (2006), is considered as the third major transaction motorbike. The ternion major proceeding in the achievement and payment turn implicate 1. Acquisition of goods and operate 2. Cash Disbursements 3. Purchase returns and allowances and purchase discounts Components such as, learnedness of raw materials, equipment, supplies, utilities, repairs and maintenance, and research and development plays a major role in the learnedness and payment cycle.The major accounts that are associated with the acquisition and payment cycle are, accounts payable, inventory, and expenses. The methodology for designing tests for phase 1 3 of the process includes designation of client dangers affecting other accounts, setting tolerable misstatements, assessing inherent risk for accounts, and assessing control risks for accounts. Business functions included in the acquisition and payment cycle includes processing purchase o rders, receiving goods and services, recognizing the liability, and processing and recording cash disbursements.The incorporation of e-commerce affects the acquisition and payment cycle in many ways. Information about the products and services that Apollo situation offers is readily accessible on the internet. This could be a r later for Apollo Shoes, since the company competitors can mimic the companys products and services. For communication purposes, Apollo Shoes use the companys intranet to communicate information securely. This action balks a potential leak of information to the public and competitors. Below is a precise illustration of the analyze of the acquisition and payment cycle for Apollo Shoes.TRANSACTION-RELATED AUDIT accusing recognize INTERNAL CONTROL greenness foot race OF CONTROL COMMON meaty TESTS OF TRANSACTIONS 1. Recorded acquisitions are for goods and services received, consistent with the trump out interests of the client. 2. Purchase requ isition, purchase order, receiving report, and vendors handbill are addicted to the voucher. Acquisitions are approved at the proper level. Computer accepts entry of purchases except from authorized vendors in the vendor passkey saddle. Documents are cancelled to prevent their reuse.Vendors invoices, receiving reports, purchase orders, and purchase requisitions are home(a)ly verified. Examine documents in voucher package for existence. Examine recital of approval. Attempt to input minutes with valid and invalid vendors. Examine meter reading of cancellation. Examine indication of internal verification. Review the acquisitions journal, widely distributed ledger, and accounts payable master file for large or unusual accounts. Examine underlying documents for reasonableness and authenticity. Examine vendor master file for unusual vendors.Trace inventory acquisitions to inventory master file. Examine obdurate assets acquired. TRANSACTION-RELATED AUDIT OBJECTIVE KEY INTERNA L CONTROL COMMON TEST OF CONTROL COMMON SUBSTANTIVE TESTS OF TRANSACTIONS 3. Existing acquisition proceedings are recorded. 4. Purchase orders are prenumbered and accounted for. Receiving reports are prenumbered and accounted for. Vouchers are prenumbered and accounted for. Account for a sequence of purchase orders. Account for a sequence of receiving reports. Account for a sequence of vouchers. Trace from a file of receiving reports to the acquisitions journal. Trace from a file of vendors invoices to the acquisitions journal. 5. Recorded acquisition transactions are accurate. Calculations and amounts are internally verified. muckle totals are compared with computer summary reports. Acquisitions are approved for prices and discounts. Examine indication of internal verification. Examine file of batch totals for initials of data control salesclerk compare totals to summary reports. Examine indication of approval. contrast recorded transactions in the acquisitions jou rnal with the vendors invoice, receiving report, and other supporting documentation. Re-compute the clerical accuracy on the vendors invoice, including discounts and freight. TRANSACTION-RELATED AUDIT OBJECTIVE KEY INTERNAL CONTROL COMMON TEST OF CONTROL COMMON SUBSTANTIVE TESTS OF TRANSACTIONS 6. Acquisition transactions are mightily classified. 7. An adequate graph of accounts is used. Account classifications are internally verified. Examine procedures manual and chart of accounts.Examine indication of internal verification. Compare classification with chart of accounts by referring to vendors invoices. 8. Acquisition transactions are recorded on the correct dates. Procedures take recording transactions as soon as possible after the goods and services have been verified. Dates are internally verified. Examine procedures manual and proceed whether unrecorded vendors invoices exist. Examine indication of internal verification. Compare dates of receiving reports an d vendors invoices with dates in the acquisitions journal. 9. Acquisition transactions are flop included in the accounts payable and inventory master files and are properly summarized. Accounts payable master file contents are internally verified. Accounts payable master file or trial balance totals are compared with frequent ledger balances. Examine indication of internal verification. Examine initials on general ledger accounts indicating comparison. Test clerical accuracy by footing the journals and canvas postings to general ledger and accounts payable and inventory master files. Results of the AuditOf the preliminary audit of Apollo Shoes acquisition and payment cycle a sample coat of 120 invoices were selected. There were missing invoices related to the sample size. The invoices were properly stick on to the general ledger sales and accounts receivable control accounts. Each invoice was posted to the appropriate account, no discrepancy was found. The invoices not list ed to the proper accounts show no deviations to other documents, re-calculations, or comparisons. The expected credit approval banknote, No credit approval, was not found in the related documents.When a annotation of the, Wrong quantity billed, was posted, a description of the explanation followed. In addition, the notation of, CM, meant the customer contacted Apollo Shoes stating an error and credit memo was issued on the pursuance date. This notation caused all credit memos to generate a debit to a sales return account followed by a credit to accounts receivable. In regards to the other documentation, there were no additional discrepancies to alert management regarding the acquisition and payment cycle. All findings of the 120 sample size were warranted.