Expenditures/Disbursements

Question 1

Identify the objectives of internal control related to the expenditures/disbursements transaction cycle.

Answer 1

1. )Disbursements are for authorized expenditures as approved by management.
2. )Disbursements are recorded at the proper amounts and classifications.
3. )The supporting accounting records are agreed to the general ledger accounts.
4. )Management authorizes any adjusting journal entries are authorized by management.
5. )Access to cash and disbursement records is limited to authorized personnel.

Question 2

List some procedures used to ensure segregation of duties in the Expenditure business cycle.

Answer 2

1. )Separate purchasing department
2. )Purchasing personnel independent from receiving and recording
3. )Bank reconciliations are prepared by someone not having other involvement in handling cash receipts, disbursements, or record-keeping.

Question 3

List two access controls applicable to the expenditures/disbursements transaction cycle.

Answer 3

1. )Cash disbursement employees should be bonded.

2. )Access to cash disbursements or related documents should be limited to authorized personnel.

Question 4

Describe management’s role in the execution of transactions controls over cash disbursements in the expenditures/disbursements transaction cycle.

Answer 4

1. )Management approves all adjusting entries approved by management.
2. )Only authorized personnel should be able to place an order for goods and services on the entity’s behalf.
3. )The department requesting the purchase should approve the goods or services received before payment is made.

Question 5

What is the difference between an accounts payable system and a vouchers payable system?

Answer 5

An accounts payable system aggregates payables to identify the total owed to any individual vendor. A vouchers payable system keeps track of individual transactions for which payment is owed without summarizing the totals by vendor.

Question 6

The auditor can use what comparison techniques to ensure appropriateness of transactions in the expenditure business cycle?

Answer 6

The auditor can compare:

1. )Suppliers’ monthly statements with recorded payables.
2. )Purchase orders to receiving document to vendor’s invoice.