Internal Control -- Purchases, Payroll, and Other Cycles Flashcards Preview

Auditing > Internal Control -- Purchases, Payroll, and Other Cycles > Flashcards

Flashcards in Internal Control -- Purchases, Payroll, and Other Cycles Deck (5)
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1
Q

What is an essential element of the audit trail in an EDI system?

A

Network and sender-recipient acknowledgments

E.g. Allows for the tracing of a transaction from initiation to conclusion

2
Q

How would I best detect if Equipment acquisitions were misclassified as a maintenance expense?

A

By investigating variances within a formal budgeting system

Why?: Because a formal planning and budgeting system that estimates maintenance expense at a certain level will:

  • Report a significant variance if capital expenditures are charged to the account
3
Q

How could I best determine the effectiveness of an entity’s policies and procedures related to the “existence or occurrence” assertion for payroll transactions?

A

By inquiring about and observing the segregation of duties involving:

  • human resource responsibilities (authorization); and
  • payroll disbursement (custody)
4
Q

What should the auditor do in a review of an EDI application using a third-party service provider?

A

(1) Determine if an independent review of the service provider’s operation was conducted
(2) Verify that the service provider’s contracts includes necessary clauses (e.g. right to audit)

5
Q

What is the primary objective of a cash budget?

A

To:

  • Ensure sufficient funds are available at all times to satisfy maturing liabilities

Note: The CFO is usually responsible for the planning tool