Objectives

  1. The type of goods and services to be obtained, the manner in which they are obtained, the suppliers from which they are obtained, and the prices and terms on which they are obtained are in accordance with management’s general or specific authorizations.    (Occurrence)
  2. All goods and services received are accounted for. (Completeness)
  3. Amounts payable for goods and services are accurately recorded as to account, amount and period. (Accuracy, cut off, classification)
  4. Access to purchasing, receiving and accounts payable records is suitably controlled to prevent or detect on a timely basis duplicate or improper payment. (Safeguard)

Control Activities

Ordering

Are all purchases based on approved requisitions?    Yes  No  N/A
(Occurrence)
Are pre-numbered written purchase orders used for all commitments setting out quantity, prices, terms and delivery requirements?
(Occurrence)
Are all purchase orders approved by specific individuals designated by management?
(Occurrence)

Receiving

Is purchase order required before the stores department can accept delivery of goods received?
(Occurrence)
Are all goods received inspected for condition and independently counted, weighed, or measured?
(Safeguarding)

Suppliers’ Invoices and Returns 

Are goods received notes independently matched with suppliers’ invoices and items for which no invoices are received investigated?
(Completeness)
Are supplier’s invoices checked for arithmetical accuracy?
(Accuracy)
Are suppliers’ invoices processed by employees who are independent of the purchasing and receiving functions?
(Accuracy Safeguarding)
Are the entries in purchase journal and posting to ledger accounts independently verified as to account, amount and period? .
(Accuracy, cutoff, classification)
Are there adequate controls to ensure recognition of liabilities for goods and services received but not invoiced?
(Cut off, completeness)
Are totals of suppliers accounts independently reconciled with control accounts?
(Accuracy)
Are duplicate invoices stamped as a precaution against duplicate payment?
(Safeguarding)
Is there evidence that services received are evaluated for uaiity and completeness
(Occurrence)

Accounts Payable

Is unpaid voucher file independently agreed with accounts payable control and suppliers’ statements?
(Accuracy, completeness)
Is accounts payable ledger maintained by persons independent of the receiving of goods, authorization of invoices and payments?
(Accuracy, safeguarding)

Cash Receipts

Objective

1. Only authorized persons handle cash and make deposits (Occurrence)
2. All collections are accounted for and recorded correctly as to account, amount and period. (Completeness, accuracy, cut oft)
3. Access to cash receipts and cash book, accounts receivable ledger, sales invoices and delivery notes is controlled to prevent or detect on a timely basis, misappropriation of cash or manipulation of recorded cash receipts.
(Safeguarding of assets)

CONTROL ACTIVITIES

Do only authorized personnel handle cash and make  deposits? Yes No N/A
(Occurrence)
Are the duties between receiving cash and posting to accounts receivable ledger segregated?
(Accuracy, safeguarding)
Does a responsible official closely observe:
– mail room procedures?
– Cash register procedures?
(Accuracy, safeguarding)
Is a daily cash summary prepared and independently agreed to mail and over – the – counter receipts?
(Accuracy, safeguarding)
Is there internal verification of agreement of daily totals of cash receipts journal entries and total posting to the accounts receivable ledger with daily cash summary?
(Accuracy, safeguarding)
Are postings to general ledger control account is made by person independent of physical handling of collection and posting to accounts receivable subsidiary ledger?
(Accuracy, safeguarding)
Are receipts of currency controlled by cash registers or pre numbered receipt forms?
(Accuracy, safeguarding)
Are accounts credited through cash book independently verified?
(Accuracy, classification)
Are cheques marked “Alc payee only” immediately upon receipt?
(Accuracy, safeguarding)
Are cash receipts deposited intact daily?
(Accuracy, safeguarding)
Is there internal check of agreement of bank deposit slips with daily cash summary?
(Accuracy, safeguarding)
Is cash counted independently regularly and on a Surprise asis?
Are monthly statements customers?
(Accuracy, safeguarding)

Cash Disbursements

Objectives

Disbursements are made only for expenditure incurred in accordance with management’s authorization (Occurrence)
All disbursements are accounted for; and recorded correctly as to account, amount and period. (Completeness and accuracy)
Access to cash and cash disbursement records is restricted to minimize opportunities for irregular disbursements (Safeguard)

CONTROL ACTIVITIES

Authorization and Validity

Are all bank accounts authorized by the board of directors?
(Occurrence)
Are all cheque signers approved by the board of directors?
(Occurrence)
Are banks promptly notified of any changes in authorized signers?
(Occurrence)
Are all disbursements and bank transfers based on payment vouchers and supporting documents, which have been approved by responsible employees designated by the management?
(Occurrence)
Is the signing of blank cheques prohibited?
(Safeguarding)
Are all cheques accounted for? (Completeness)
Is there a segregation of duties between issuing and recording the cheques?
(Safeguarding, accuracy)
Are entries in cash book independently verified?
(Accuracy)
Are all disbursements except for petty cash made by cheques?
(Safeguarding)
Are supporting documents and payment vouchers “Paid” when cheques are signed?
(Safeguarding)
Is the issuing of bearer cheques prohibited?
(Safeguarding)
Are bank reconciliation independently reviewed?
(Accuracy)
Is cash maintained on an imprest basis?
(Safeguarding)
Are long outstanding cheques investigated?
(Accuracy, safeguarding)
Is cash independently counted at regular intervals and on surprise basis?
(Accuracy, safeguarding)
Is the petty cash box secured?
(Safeguarding)
Are petty cash vouchers approved?
(Occurrence)
Are petty cash vouchers are numbered?
(Completeness)

Payroll

Objective

Payroll is incurred in accordance with management’s authorization.
(Occurrence)
There are no dummy employees
(Occurrence)
All salaries and wages are accounted for; and recorded correctly as to account, amount and period. (Completeness and accuracy)
Access to payroll records is restricted to minimize opportunities for irregular or erroneous disbursements. (Safeguard)
Are personal files maintained for individual employees which include appropriate written authorization for rated of pay?
(Occurrence)
Are total production hours used for determination of gross pay reconciled with production statistics used for cost accounting purposes? (Accuracy)
Are piece rates records reconciled with production records?
(Accuracy, occurrence)
Are salesmen commission records reconciled with recorded sales?
(Accuracy)
Is payroll independently checked for casts and calculations?
(Accuracy, occurrence)
Are deductions from payroll authorized? (Occurrence)
Are time clocks supervised by a responsible official?
(Accuracy, occurrence)
Are proper controls exercised over deductions for absenteeism?
(Accuracy, occurrence)
Is payroll summary approved and initialed by a responsible official?
(Occurrence)
Are payments for casual labor approved?
(Occurrence)
Is written authorization required for overtime?
(Occurrence)
Is payroll approved in writing by responsible employees before issuance of cheques or distribution of cash for net pay? (Occurrence)
Is net pay distributed by persons who are independent of payroll preparation, tmre-keeping, and cheque preparing functions? (Safeguarding)
Is access to personnel and payroll records limited?
(Safeguarding)
Is there adequate segregation of duties among employees
who perform the following functions.
Authorization of rates of pay?
Maintenance of personnel records?
Preparation of payroll?
Approval of payroll?
(Safeguarding)
Is responsibility for custody and follow-up of unclaimed wages assigned to a responsible person independent of payroll processing and cash disbursement functions? (Safeguarding)
Are data for hours worked, piece work used to determine gross pay compared at reasonable intervals with applicable production records by a responsible person?
(Safeguarding, accuracy)
Are wages and salaries regularly compared with budgets and significant variance investigated?
(Accuracy)

Posted on November 3, 2015 in Identifying and Assessing the Risks of Material Misstatement through Understanding the Entity and Its Environment

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