TAILIEUCHUNG - Lecture Auditing and assurance services (Second international edition) - Chapter 11: Auditing the purchasing process

In this chapter, the learning objectives are: Understand why knowledge of an entity's expense and liability recognition policies is important to the audit, understand the purchasing process, know the types of transactions in the purchasing process and the financial statement accounts affected, be familiar with the types of documents and records used in the purchasing process. | Auditing the Purchasing Process Chapter Eleven Expense and Liability Recognition (IASB) Expenses are decreases in economic benefits during the accounting period in the form of outflows or depletions of assets or incurrences of liabilities that result in decreases in equity, other than those relating to distributions to equity participants A liability is a present obligation of the entity arising from past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits Overview of the Purchasing Process A purchase transaction usually begins with a purchase requisition generated by the user department. The purchasing department prepares a purchase order that is sent to the vendor. When the goods are received or the services rendered, a liability is recorded. Finally, the entity pays the vendor. Purchase requisition Purchase order Receiving report and liability recorded Vendor Types of Transactions and Financial Statement Accounts Affected Three types of transactions are processed through the purchasing process: Flowchart of the Purchasing Process – EarthWear Clothiers Department Requesting Purchasing IT Purchase requisition Approved purchase requisition received Input Error corrections Purchase order program Purchase order file Accounts payable master file Error report Purchase order (4 part) Purchasing Vendor A/P Receiving PO #2 Filed Numer-ically Flowchart of the Purchasing Process – EarthWear Clothiers Daily receiving log Department Receiving Accounts Payable (A/P) PO #1 Goods received, counted and inspected Receiving report (RR) Enter vendor, quantity, and PO # PO #3 Receiving report Vendor invoice Compare invoice to PO and RR Review account distribution Voucher packet Input Error correction To IT From IT Flowchart of the Purchasing Process – EarthWear Clothiers Department IT Accounts payable update Purchase order file A/P master file General ledger file Error report Input from A/P Report to A/P .

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• Assurance services
• Financial statement auditing
• Auditing services
• Auditing business processes
• Auditing internal control
• Purchasing process
• Assurance services profession
• Audit process
• Assurance framework
• Accounting information
• Financial statement audit
• Auditing and assurance services
• Auditing environment
• Professional standards
• Auditing standards
• Internal auditing services
• Contemporary auditing environment
• Attestation engagements
• Account balances
• Structure of the profession
• Audit firms
• Corporate governance
• Professional ethics
• Legal liability
• Liability to clients
• Financial repport audit process
• Financial report assertions
• The business
• Strategic business risk
• Inherent risk assessment
• Inherent risk
• Internal control structure
• Assessing control risk
• Tests of controls
• Sales cycle
• Substantive tests
• Substantive tests of transactions
• Audit sampling
• Sampling theory
• Adjusting events
• Financial report
• Auditor’s reporting obligations
• Professional reporting obligations
• Prospective financial information
• Highlight information
• Institute of internal auditors
• Government accounting
• Reporting duties