Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
14-30
14-34 (continued)
d.
TRANSACTION-
RELATED
AUDIT OBJECTIVE
SUBSTANTIVE TEST OF TRANSACTIONS
AUDIT PROCEDURES
1. Recorded sales
occurred.
Select a sample of sales from sales journal and
examine customer’s purchase order, sales order
form, and bill of lading to determine that the goods
were ordered and shipped.
2. Existing sales
transactions are
recorded.
Perform analytical tests, including comparisons of
operating statistics to prior years’ and month to
month at year-end.
3. Recorded sales
transactions are stated
at the correct amounts.
Compare sales prices to price lists. Examine
customer correspondence indicating pricing
disputes. Test clerical accuracy of a sample of sales
invoices.
4. Sales transactions are
properly included in
the accounts
receivable master file
and are correctly
summarized.
Foot the sales journal and trace the balance to the
general ledger.
5. Recorded sales are
properly classified.
Examine sales documents to determine that sales
transactions are properly classified.
6. Sales are recorded on
the correct dates.
Compare dates on bills of lading to the sales journal
to determine that sales are recorded on a timely
basis. Compare sales month to month and
investigate any significant fluctuations, especially
near year-end.
e. An audit program for conducting the audit of sales is as follows:
1. Obtain the sales journal for the year and perform the following
procedures:
general ledger balance.
(b) From the journal, select a sample of invoices and
perform the following:
14-31
14-34 (continued)
Compare quantity, sales price, customer name,
and date of shipment to sales journal. Obtain
explanation of any differences.
(2) Examine sales order form for indication of
credit approved.
2. Select a sample of bill of lading numbers. Locate the
sales journal to determine the promptness of recording.
3. Examine customer correspondence during the year for
disputes on pricing of invoices.
4. Prepare a schedule of sales, cost of sales, and gross margin
percentage, showing comparison between recent years and
fluctuations.
Integrated Case Application
14-35 a.,
b.,
c.,
and d.
PINNACLE MANUFACTURING―Part V
#
a.
Key Internal Control
b.
Transaction Related Audit Objectives
c.
Test of Control
d.
Substantive Test of Transaction
1.
Segregation of the
purchasing, receiving,
and cash disbursements
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.
Use of prenumbered
voucher 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.
3.
Use of prenumbered
checks, 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).
4.
Use of prenumbered
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.
5.
Internal verification of
document package
before check
preparation.
Recorded acquisitions are for goods and
services actually received (occurrence).
Recorded acquisitions are stated at the
correct amounts (accuracy).
Acquisition transactions are properly
included in the master files, and are
properly summarized (posting and
summarization).
Acquisitions are properly classified
(classification).
Acquisitions are recorded on the correct
dates (timing).
Examine document
package for indication
of internal verification.
Examine supporting documents for
propriety and recompute
information on the supporting
documents.
14-32
Copyright © 2017 Pearson Education, Inc.
14-35 (continued)
a.,
b.,
c.,
and d.
#
a.
Key Internal Control
b.
Transaction Related Audit Objectives
c.
Test of Control
d.
Substantive Test of Transaction
6.
Review of supporting
documents and signing
of checks by an
independent, authorized
person.
Recorded cash disbursements are for goods
and services actually received
(occurrence).
Examine checks for
signature.
Trace the cancelled check to the
related acquisitions journal entry
and examine for payee name and
amount.
7.
Cancellation of
documents prior to
signing of the check.
Recorded acquisitions are for goods and
services actually received (occurrence).
Examine indication of
cancellation.
Examine the acquisitions journal
for duplicate entries to a vendor.
8.
Monthly reconciliation of
the accounts payable
master file with the
general ledger.
Acquisition transactions are properly
included in the master files, and are
properly summarized (posting and
summarization).
Cash disbursement transactions are
properly included in the master file, and
are properly summarized (posting and
summarization).
Inquire of client about
monthly reconciliation
procedures.
Foot acquisitions and cash
disbursements journals and trace
postings to the general ledger
and accounts payable and
inventory master files.
9.
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).
14-33
Copyright © 2017 Pearson Education, Inc.
14-35 (continued)
e.
Acquisitions Substantive Tests of Transactions
Note: More than one audit procedure is listed for certain objectives even though the requirement is for only one procedure.
TRANSACTION-RELATED
AUDIT OBJECTIVES
SUBSTANTIVE AUDIT PROCEDURES
Occurrence
Examine underlying documents for propriety.
large or unusual amounts.
Completeness
Trace a sample of receiving reports to the acquisitions journal.
Trace from a file of vendors’ invoices to the acquisitions journal.
Trace from additions in perpetual inventory records to recorded acquisitions.
Accuracy
Compare amounts for entries in acquisitions journal to related vendors’ invoices,
purchase orders and receiving reports.
Recompute information on vendor invoices.
Compare prices on vendor invoices with approved price limits established by
management.
Posting and Summarization
Trace individual entries in accounts payable master file to acquisitions journal.
Classification
Examine vendors’ invoices for proper classification.
Compare classification with chart of accounts by reference to vendors’ invoices.
Timing
Compare dates of receiving reports and vendors’ invoices with dates in the
acquisitions journal.
14-34
Copyright © 2017 Pearson Education, Inc.
14-35 (continued)
f.
Cash Disbursements Substantive Tests of Transactions
Note: More than one audit procedure is listed for certain objectives even though the requirement is for only one procedure.
TRANSACTION-RELATED
AUDIT OBJECTIVES
SUBSTANTIVE AUDIT PROCEDURES
Occurrence
Trace cancelled check numbers in the cash disbursements journal to related cancelled
Examine cancelled check for authorized signature, proper endorsement, and
cancellation by the bank.
Review the cash disbursements journal, general ledger, and accounts payable master
file for large or unusual amounts.
Trace cancelled check to the related acquisitions journal entry and examine for payee
name and amount.
Completeness
Trace entries in acquisitions journal to subsequent payment in cash disbursements
journal.
Accuracy
Compare cancelled checks with the related acquisitions journal and cash disbursements
journal entries.
Recompute cash discounts.
Posting and Summarization
Trace individual entries in accounts payable master file to cash disbursements journal.
Classification
Compare classification with chart of accounts by reference to vendors’ invoices and
acquisitions journal.
Timing
Compare dates on cancelled checks with cash disbursements journal.
Compare dates on cancelled checks with the bank cancellation date.
14-35
Copyright © 2017 Pearson Education, Inc.
14-36
14-35 (continued)
through f.
General
1. Discuss the following items with client personnel and observe
activities:
a. Segregation of duties
with the general ledger.
2. Test journal summarization and posting for a test month:
master files.
b. Foot cash disbursements journal and trace postings
3. Examine file of completed bank reconciliations.
4. Account for a sequence of cancelled checks.
5. Reconcile recorded cash disbursements with cash
Acquisitions
8. Trace entries in the acquisitions journal to related vendors’
invoices, receiving reports, and purchase orders.
and summarization.
b. Examine supporting documents for propriety.
14-37
14-35 (continued)
9. Account for a sequence of receiving reports and voucher
packages.
10. Trace a sample of receiving reports and vendors’ invoices
to the acquisitions journal.
Cash Disbursements
11. Select a sample of cancelled checks and:
a. Trace cancelled check to the related cash
14-36 ACL Problem Solution
the worksheet on the screen).
b. There are nine shipments with ship dates in 2013. (Use Quick Sort
command for the ship_date column).
c. There are no duplicate shipping numbers. There are 24 gaps
involving 46 missing shipping documents. A number of the gaps
misstatements. (Use Gaps and Duplicates command under
Analyze for the Shipping Number column).
d. The greatest number of shipments was 11 to customer 0239212,
which is a small percentage of the 4,082 shipments. The most
shipments by customer number).
14-38
14-36 ACL Problem Solution (continued)
descending order).
f. There are 1,042 shipments with 100 or more items. The output
using 10 equal intervals is shown below. (Use Filter to exclude all
shipments with less than 100 items and then use Stratify
<<< STRATIFY over 100-> 183 >>>
>>> Minimum encountered was 100
>>> Maximum encountered was 183
items_shipped Count <-- % % --> Items
Shipped
100 -> 108 141 13.53% 10.48% 14,685
109 -> 116 138 13.24% 11.08% 15,530
117 -> 124 144 13.82% 12.39% 17,376
125 -> 133 102 9.79% 9.39% 13,165
1042 100.00% 100.00% 140,187
