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

After reading the material in this chapter, you should be able to: 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. | Chapter Eleven Auditing the Purchasing Process 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 There are three types of transactions: Purchase of goods and services for cash or credit. Payment of the liabilities arising from such purchases. Return of goods to suppliers for cash or credit. Types of Transactions and Financial Statement Accounts Affected Flowchart of the Purchasing Process – EarthWear Clothiers Requesting Purchasing IT Department 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 Department Receiving Accounts Payable (A/P) PO #1 Goods received, counted, and inspected Receiving report (RR) Enter vendor, quantity, and PO # Daily receiving log 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 .

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• Financial statement auditing
• Audit planning
• Internal control
• Auditing business processes
• Purchasing process
• Auditing the purchasing process
• Auditing services
• Assurance services
• Auditing internal control
• Financial statement auditing environment
• Auditing demands logic
• Auditing environment
• Financial reporting
• Income statement accounts
• Financial statement audit
• Auditing the financing
• Internal auditing services