Expenditures/Disbursements

Question 1

What is the process for expenditures/Disbursements?

Answer 1

1) Purchase request
2) Purchase order
3) Receiver Report
4) Suppliers Invoice
5) Record in purchase journal
6) Post to G/L

Question 2

What is the disbursement process?

Answer 2

1) Prepare check & remittance advice
2) Record payment in the Cash Disbursement Journal
3) Post cash payments to the General Ledger

Question 3

What are the segregation of duties with respect to expenditures/cash disbursements?

Answer 3

1) Authorization or execution
2) Access (custody)
3) Accounting (record keeping)

Purchasing department- has the authorization to purchase

Receiving department- Controls the delivery of goods and prepares the receiving report

Accounts Payable- handles accounting & approves payment

Question 4

What are the controls (physical control) duties with respect to expenditures/cash disbursements?

Answer 4

1) Employees with access to cash should be “bonded”

Limit access to cash and to key accounting documents (including purchase orders) to authorized personnel

2) Passwords
3) Purchase order functions should only be authorized to certain personnel

Question 5

What are the authorization duties with respect to expenditures/cash disbursements?

Answer 5

Transactions should be executed as authorized
- Only designated personnel in Purchasing Department can order goods and services for the company

• Dual signatures required for cash disbursements
• The department requesting the order should indicate its acceptance prior to authorizing the company’s payment of the suppliers invoice
• Any adjusting entries should be reviewed and approved by management

Question 6

What are the review (performance review) duties with respect to expenditures/cash disbursements?

Answer 6

• Monthly statements from suppliers are compared to recorded accounts payable
• The purchase order, receiving documents, and supplier’s invoice should be compared to make sure that the invoice reflects what was received (and what was ordered) before authorizing payment
• For both receipts and disbursements: bank reconciliations should be prepared on a timely basis (to compare the company’s records with the bank records”

Question 7

What is the difference between accounts payable and vouchers payable?

Answer 7

A/P: Tracks obligations to a specific suppliers involved (can identify the total owed to each supplier)

Vouchers Payable: Tracking individual transactions without summarizing by the specific supplier

Question 8

What are the EDP/IT (Information Processing) duties with respect to to expenditures/cash disbursements?

Answer 8

• Focus on the entity’s records (regarding the adequacy & audit trail)

All of the “key” documents should be pre-numbered and the numerical sequence should be properly accounted for (to establish control of the population of important accounting documents)

• General ledger accounts should be supported by detailed records
• Supporting documents should be canceled as “PAID” immediately upon payment

Question 9

If an auditor finds controls that are undocumented, how would you handle this?

Answer 9

Inquiry and observation

Question 10

The person who has custody over writing checks should also be responsible for mailing the checks?

Answer 10

True

Question 11

The purchasing department will also negotiated terms?

Answer 11

True

Question 12

What is the proper control for nonconforming goods that will be sent back to the vendor?

Answer 12

The purchasing department should give the A/P department a debit memo advising accounting that the vendor invoice SHOULD NOT be paid in full due to the returned goods

Question 13

The individual who matches vendor invoices with the receiving report should do what?

Answer 13

Recompute the calculations on the vendor invoices (this is the purchasing department before it goes to A/P for payment)