An important control in the acquisition and expenditure process is the accounts payable clerk’s comparison of the vendor invoices with the purchase orders and the receiving reports for dates, quantities, prices, and terms.
a. Describe the misstatement in the financial statements that could occur if this control is not present.
b. Explain how you would design a substantive test to evaluate the potential misstatement in the financial statements if the control is missing.
c. Describe how you could test the internal control.