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Acquisition and Payment Cycle

In: Business and Management

Submitted By trobeson4029
Words 256
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Audits of the acquisition and payments cycles involve purchase of goods and services, cash payments, and purchase returns and allowances/discounts. Auditors will review documents related to the acquisition and payment cycles. The documented transactions reviewed will be from: * Inventory * Property, plant and equipment * Prepaid expenses * Leasehold improvements * Accounts payable * Manufacturing expenses * Selling and administrative expenses
The business functions in the cycle should be processing purchase orders, receiving goods and services, recognizing the liability and processing and recording the cash disbursements. Auditors will examine these documents to verify control procedures. They will search for missing documentation, approvals of purchases and payments. Unrecorded liabilities are an item that will be researched. They will do this by reviewing the open purchase order file, unmatched receiving report file and unmatched invoice file. Auditors will review the reasons for the differences between prior year liabilities and present year liabilities. Accounts payable will be reviewed to verify transactions and cutoff dates. This verification will ensure that Apollo correctly records the liabilities in the year incurred. Confirmation of account balances with vendors will be necessary to verify large and zero dollar balances. Apollo does have an issue with one particular liability recorded in preceding year instead of the year incurred.

References:
Arens, A.A., Elder, R.J., & Beasley, M.S. (2006). Auditing and assurance services: An integrated approach (11th ed.). Retrieved from The University of Phoenix eBook
Collection database.
Louwers, T.J. & Reynolds, J.K.. (2007). Apollo Shoes, Inc. [Multimedia]. Retrieved from the University of Phoenix, ACC546 - Auditing

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