TAILIEUCHUNG - Lecture Auditing & assurance services (8e) - 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, understand the functions in the purchasing process. | Chapter 11 Auditing the Purchasing Process McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved. Expense and Liability Recognition Expenses are outflows or other using up of assets or incurrences of liabilities from delivering or producing goods, rendering services, or carrying out other activities that constitute the entity’s ongoing major or central operations. Liabilities are probable future sacrifices of economic benefits arising from present obligations of a particular entity to transfer assets or provide services to other entities in the future as a result of past transactions or events. LO# 1 11- 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 LO# 2 11- LO# 3 Types of Transactions and Financial Statement Accounts Affected Three types of transactions are processed through the purchasing process: 11- Types of Documents and Records Purchasing documents and records . . . Purchase Requisition – request to purchase goods or services. Purchase Order – includes description, quality, and quantity of goods or services being purchased. Receiving Report – records the receipt of goods. Vendor Invoice – the bill from the vendor. Voucher – serves as the basis for recording a vendor’s invoice. Voucher Register – used to record vouchers for goods and services. Accounts Payable Subsidiary Ledger – includes amount owed to individual vendors. Vendor Statement – represents the purchase activity with vendor. Check – pays for goods or services. Check Register – contains columns to record credits to cash and debits to accounts payable and cash discounts. LO# 4 .

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• Auditing services
• Assurance services
• Financial statement auditing
• Auditing business processes
• Auditing internal control
• Auditing the purchasing process
• Internal auditing services
• Internal auditing
• Auditing the financing
• Auditing demands logic
• Financial statement auditing environment
• Auditing environment
• Audit planning
• Internal control
• Related services