LEARNING OBJECTIVES

After completing and discussing this case, you should be able to:

Recognize common business documents used with purchases and cash

disbursements

Recognize common control activities used to process purchases and cash

disbursements

Identify control activities that reduce the likelihood of material

misstatements and link the activities to management assertions

Design tests of controls for control activities related to purchases and cash

disbursements

Design substantive tests of transactions to detect material misstatements

for non$-$payroll accounts in the expenditure cycle

Design analytical tests to detect potential material misstatements for non$-$

payroll accounts in the expenditure cycle

Design substantive tests of balances to detect material misstatements for

accounts payable

Link tests of controls and substantive tests to management assertions

related to purchases, cash disbursements, and accounts payable

Identify significant deficiencies and material weaknesses for non$-$payroll

expenditure cycle accounts

INTRODUCTION

Chateau Americana $($CA$)$ has an annual production of approximately $385,000$ cases

of wine. Production of the $385,000$ cases of wine requires roughly $3,200$ tons of

grapes. One$-$fourth of the needed grapes are harvested from CA's $125-$acre vineyard,

the remaining grapes are predominantly purchased from California vineyards. Other

purchases associated with the production of wine include oak barrels, bottles, cork,

neck wrappers, and labels. CA also has non$-$payroll administrative, marketing, and

have substantially increased in the past year to improve CA's market penetration.