TBChap008

Purchase/payables/payment system: Based on a sample of 75 cash disbursements we concluded that the controls were operating effectively. Cash disbursements were made for purchases of raw materials from suppliers in Taiwan, and traced back to be properly converted to U.S. dollars and classified to the appropriate accounts.

2.After returning from a shopping trip with his mother, little Tommy reported, “I goed to the store and eated candy.” Why might a behaviorist such as B. F. Skinner have had some difficulty explaining Tommy's incorrect grammatical construction? What sort of theory could explain the errors? What would that explanation be?

This control is directly related to the accuracy transaction-related audit objective for sales. The auditor might test the effectiveness of this control by examining a sample of duplicate sales invoices for the clerk’s initials indicating that the unit selling price was verified.

Sales invoices are prepared in batches on a daily basis using numbered sales invoices. Sales invoice numbers are automatically generated by the company’s computer system. The accounts receivable clerk does not have appropriate computer rights to override the computer-generated invoice number. Upon preparing sales invoices, the accounts receivable clerk verifies that the first invoice number of the batch is consistent with the last invoice number of the previous batch. Inconsistencies or skipped sales invoice numbers are investigated and resolved before new sales invoices are prepared. The items shipped are compared to the items billed for proper quantity, price, and other sales order terms.

This links to the G.L. control account which in the purchasing cycle is accounts payable. However, the system allows a company to set up multiple reconciliation accounts. For example, a company may want to separate the vendors by geographic region. This is easily done by having different AP control controls for different geographic regions.

The interview with Colin Smith, from Office Products Depot, meant I was able to identify the accounts receivable subsystem they used and their accounts receivable management. I focussed on their policies for the offering and checking of credit, managing credit levels, charging the credit customers, receiving payment from credit customers and the general management of credit customers. I will be using the information from the interview with Colin as well as information from fictitious accounts receivable to explain their policies.

Trace items returned to the receiving report, taking note of quantity and date received (S‑4).

Accounts receivable reflects a balance of how much money is owed to the clinic. A summary of accounts receivable can reflect any outstanding balances on a patient account and can be helpful information to the clinic, especially if a patient’s account is sent to a collection agency. Other money owed to the clinic in the form of rent, royalties, and interest should be tracked and documented in a separate area from accounts receivable. Accounts payable reflects the amount of money that is owed to others, such as overpayments due to patients and vendor invoices or statements. Business invoices or statements should be placed in a specific spot according to office protocol until each bill is paid and documented accordingly.

Regarding to accounts payable, firstly, Cash Office Personnel processes invoices from supplier by checking invoices against purchase order details when goods are received, this is done through Woolworths invoice processing system. If the invoices don’t match the Woolworths system they will be sent back to suppliers for modification, if invoices meet requirements and match the orders, each departments and lines will confirm receipt and approve invoices. Where there is a quantity or pricing difference, Woolworths may process a claim based on the Trading Terms. Deductions may apply to

The chief executive of the company was closely working with the vendors whose confirmations were vital in the auditing work and hence they could have submitted false confirmations. The auditing firm established a national risk management program for its clients and so national reviews were done to identify the high risk items in the financial statement. The vendor allowances were particularly high but they were not documented. As such, the auditors were supposed to demand for the documentations and compare them with the real figures. It is however noted that most of the documentations received were non-standard and this could have led to a different audit report given that vendor allowances were earlier identified as a high risk area. Inventory management was found to be poor especially in the allowances for inventory reserves. The audit firm was therefore obliged to carry out a thorough evaluation of the inventory reserves and determine whether it was reasonable. The valuation was also supposed to include all classes of inventory but for the case of the company, the evaluation excluded instances where no sales had been made. Hence, this evaluation could not accurately represent the position of the inventory reserve in the company. (Waters,2003)

The Three-way matching procedure used by the accounts payable is other internal strength. When this company process an invoice received from a supplier, it matches the following information: purchase order, receiving report, and

d. Trace the date, check number, and amount of outstanding item – Occurrence & Completeness. (AU-C 315.A114 a.i-ii)

c. The recording of transshipping transactions as retail sales. – The auditor should obtain documentation of the transshipping transaction. The auditor should then trace the

When engaged in auditing a public firm, such as Apollo Shoe Inc., an auditor must determine when to trust in the company’s internal controls and when to ascertain auxiliary testing methods are obligatory to analyze control risks. The sales and collection cycle is rather a substantial fraction of the audit because this unique segment employs a multitude of documentation and records ranging anywhere from customer and sales orders, shipping documents, credit memos, and general journal entries; therefore, a working

Cash receipts handled by the purchasing department as well as cheques to settle vendor allowances