INTEGRATED CASE APPLICATION:

PART V

Key internal controls:

1. Segregation of the purchasing, receiving and cash payment functions.
2. Independent reconciliation of the monthly bank statements.
3. Use of pre-numbered document packages, properly accounted for.
4. Use of pre-numbered cheques, properly accounted for.
5. Use of pre-numbered receiving reports, properly accounted for.
6. Internal verification of document package before cheque preparation.
7. Review of supporting documents and signing of cheques by an independent,
authorized person.
8. Cancellation of documents prior to signing of the cheque.
9. Monthly reconciliation of the accounts payable master file with the general
ledger.

(a): Transaction-related audit objective(s)

(b): Procedure to test the control

(c): Substantive test of transactions audit procedure

KEY INTERNAL CONTROL TRANSACTION-RELATED AUDIT OBJECTIVE(S) PROCEDURE TO

TEST THE CONTROL SUBSTANTIVE TEST OF TRANSACTIONS
1. Segregation of the purchasing, receiving and cash payment functions -
recorded acquisitions are for goods and services actually received (occurrence).
- recorded cash disbursements are for goods and services actually received
(occurrence). - discuss segregation of duties with personnel and observe
activities. - trace entries in the acquisitions journal to related vendors’
invoices, receiving reports and purchase orders.
2. Independent reconciliation of the monthly bank statements - existing cash
disbursement transactions are recorded (completeness).
- recorded cash disbursement transactions are stated at the correct amounts
(accuracy). - examine file of completed bank reconciliations. - reconcile
recorded cash disbursements with the cash disbursements on the bank statement
(proof of cash disbursements).
3. Use of pre-numbered document packages, properly accounted for - existing
acquisition transactions are recorded (completeness).- account for a sequence of
voucher packages. - trace from a file of vendors’ invoices to the acquisitions
journal.
4. Use of pre-numbered cheques, properly accounted for - existing cash
disbursement transactions are recorded (completeness). - account for a
sequence of checks. - reconcile recorded cash disbursements with the cash
disbursements on the bank statement (proof of cash disbursements).
5. Use of pre-numbered receiving reports, properly accounted for - existing
acquisition transactions are recorded (completeness).- account for a sequence of
receiving reports. - trace from a file of receiving reports to the
acquisitions journal.