The following questions are part of an internal control questionnaire for the acquisition and expenditure process. For each question:
a. Describe the misstatement in the financial statements that could occur if the client answers “no.”
b. Explain how you would design a substantive test to evaluate the potential misstatement in the financial statements due to the missing control.
c. If the client answers “yes” to the question, describe an internal control that it could use.
d. Describe how you could test the internal control described in part (c).
Internal control questions:
1. Are all purchases made only on the basis of approved purchase requisitions?
2. Are the purchasing department, accounting department, receiving department, and shipping department independent of each other?
3. Do managers compare actual expenses to budget?
4. Are invoices approved for payment by a responsible officer?
5. Are unmatched receiving reports reviewed frequently and investigated for proper recording?
6. Does the accounting manual give instructions to date purchase/payable entries on the date of receipt of goods?

  • CreatedJanuary 22, 2015
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