Chapter 10: Auditing the Expenditure Cycle Flashcards
The audit objectives under this management assertion include:
- Verify that the accounts payable balance represents amounts actually owed by the organization at the balance sheet date.
- Establish that purchases transactions represent goods and services actually received during the period covered by the financial statements.
- Determine that payroll transactions represent wages for services actually performed during the period covered by the financial statements
Existence or Occurrence
The audit objectives under this management assertion include:
1. Determine that accounts payable represent all amounts owed by the organization for purchases of goods and services as of the balance sheet date.
2. Ensure that the financial statements reflect all goods and services received by the organization, less returns, for the period covered.
3. Verify that the financial statements reflect all wages for services performed during the period covered.
Completeness
The audit objectives under this management assertion include:
1. Establish that purchases transactions are accurately computed and based on correct prices and correct quantities.
2. Ensure that the accounts payable subsidiary ledger is mathematically correct and agrees with the general ledger accounts.
3. Verify that payroll amounts are based on correct pay rates and hours worked and are accurately computed.
Accuracy
The audit objective under this management assertion include:
- Establish that the accounts payable and accrued payroll recorded at the balance sheet date are legal obligations of the organization
Rights and Obligations
The audit objectives under this management assertion include:
1. Verify that accounts payable are stated at correct amounts owed.
Valuation or Allocation
The audit objectives under this management assertion include:
1. Ensure that accounts payable, accrued payroll, and expenses reported for the period are properly described and classified in the financial statements.
Presentation and Disclosure