Audit Field Standards: Audit of Purchasing and Account Payables Session 10

Learning Objectives Understanding Audit Field Standards of Audit of Purchasing and Account Payables Understanding Internal Control of Purchasing and Account Payables Understanding Audit Objectives of Purchasing and Account Payables Being able to design Audit Procedures of Purchasing and Account Payables Understanding of Documents (evidence) to support the records of Purchasing and Account Payables Audit Evidence of Purchasing and Account Payables Confirmation about Account Payables Some Frauds involving Purchasing and Account Payables Examples of Audit Findings of Purchasing and Account Payables

The Internal Control Objectives of Purchases and Account Payables Goods or services purchased are needed Goods or services bought with a good price Goods or services are bought from a qualified supplier Purchases are tighten in a clear agreement Goods or services bought are received as needed Goods or services bought are recorded and classified properly Purchases and Account Payables are paid in the period of the company’s favor without getting any pinalty

Activities Need to be Examined Requesting of purchase activity Purchasing activity (the way of purchase) Receiving activity (The way of receive) Paying activity (The way of pay)

Audit Procedures of Purchasing and Account Payables are the steps to be done sequentially to achieve the audit objectives

Audit Objectives of Fixed Assets Transaction Audit Objectives  Occurrence  Completeness  Accuracy  Cut off  Classification Balance Audit Objectives  Existence  Completeness  Right and Obligation  Valuation and Allocation

Audit Objectives of Fixed Assets Disclosure Objectives  Occurrence  Right and Obligation  Completeness  Classification and Understandability  Accuracy and Valuation (Boynton, Modern Auditing 8 edition)

Documents (evidences) to support the records of Purchasing and Account Payables PR (Purchase Requisition) PQ (Purchase for Quotation Bid Evaluation Contract or Agreement Letter PO (Purchase Order) RR (Receiving Report) DO (Delivery Order of supplier) Invoice of supplier Purchase Return Document Cash Receipt of Supplier

Audit Evidence of Purchasing and Account Payables Inquiries of the client Documentation Confirmation Observation Physical examination Analytical procedures Reperformance

Confirmation about Account Payables

Some Frauds in Purchasing and Account Payable Over or under stating the value of A/P Misclassifying Account Payables Not debiting A/P paid

Examples of Audit Findings of Purchasing and Account Payables Condition Criteria Causes Effects Recommendation