Pinnacle: Accounts Receivable and Master File

A.B and C
|No. | Key Internal Control |Transaction Related Audit Objectives | Test of Control |Substantive Test of Transaction | |1. |Segragation of the purchasing, receiving | Recorded cash payments are for goods and services actually |Adequate segragation of duties and |Trace the entries in the acquisitions journale to | | |and cash payment functiions |received. |observe activities. |related vendor’s invoice, rerports and purchase orders.| | | |(existence or occurence) |Discuss with personnel and observe | | | | | |activities. | | |2. |Independent reconciliation of the monthly |Existing cash payment transactions are recorded (completeness) |Examine Bank reconciliation and |Reconcile recorded cash payments with the cash payments| | |bank statments. | |observe their preparation. |on the bank statement. | | |Use of prenumbered document packages, |Existing transaction are recorded (completeness) |Account for a sequence of document |Examine supporting documents as a part of tests of | |3. |properly accounted for | |packages. |acquisitions | |4. |

Use of prenumbered cheques, properly |Existing cash payment transanction are recorded. |Account for a sequence of cheques. |Reconcile recorded cash payment with the cash payment | | |accounted for. |(completeness) | |on the bank statment. Prepare a proof of cash payments | | |Use of prenumbered receiving reports, |Existing acquisition transaction are recorded (completeness) |Account for a sequence of receiving |Trace from a file to receiving reports to the | |5. |properly accounted for. | |reports. |acquistions journal. | |6. |Internal verification of document package |Recorded payments are for goods and services actually |Examine document package for |Examine supporting documents for properly and | | |before cheque preparation |received. (existence or occurence). |indication of internal verification. |recomputed information on the supporting documents. | | | |Recorded cash payment are accurate. (accuracy) | | | | | |Payment transactions are properly included in the accuounts | | | | | |payable master file and are properly summarised. (posting and | | | | | |summerisation). | | | |7. |Review of supporting documents and signing |Recorded cash payments are for goods and services actually |Examine cheques for signature.

Trace the paid cheque to the related purchases journal | | |of cheques by an independent, authorised |received. ( existence or occurence) | |entries and examine for payee name and amount. | | |person. | | | | | |Cancellation of documents prior to signing |Recorded cash paymen are for goods and serivces actually |Examine indication of cancellation. |Examine the cash payment journal for duplicated entries| |8. |of the cheque. |recived. ( existence or occurence) | to vendor. | |9. |Monthly reconciliation of the accounts |Cash payment transaction are properly included in the accounts |Examine intials on general ledger |Trace postings to the general leger and accounts | | |payable master file with the general |payable master file and are properly summarised. (posting and |accounts indicating comparison. |payable and inventory master files. | | |ledger. |summarisation) | | |

D. Acquistions Substantive Tests of Transactions

|Transaction- Related Audit Objective |Substantive Audit Procedures | |Existence | -Reivew the purchases journal, general ledger and account payable master file for large or unsual amouts. | |Completeness |-Trace from a file of vendors invoices to the purchases journal | |Accuracy |-Compare amounts for entries in purchases journal to related vendors’ invoices, purchase orders and receiving | | |reports. | |Classification |-Compare classification with chart of accounts by refrences vendors’ invoices and purchases journal | |Timing |-Compare dates of receiving reports and invoices with dates in the acquistion journal. | |Posting and summarization |-trace individual entries in accounts paybale master file to purchases journal. |

E. Cash Payments Substantive Tests of Transactions

|Transaction-Related audit Objective |Substantive Audit Procedures | |Existence |-Trace cancelled cheque to the related purchases journal entry and examine for payee name and amount. | |Completeness |-Trace entries in purchases journal to subsequent payment in cash payment journal | |Accuracy |-Compare cancelled cheque with the related acquistions journal and cash payments journal entries. | |Classification |-Compare classification with chart of accounts by refrence to vendors’ invoices and purchases journal. | |Timing |-Compare dates on cancelled cheque with the bank cancellation date. | |Posting and Summarization |-Trace individual entries in accounts payable master file to cash payment journal. |

F. Audit Program for Acquisitions and Cash Payments

General
1. Discuss Segregation of duties with personnel and observe activies. 2. Trace postings to the general leger and accounts payable and inventory master files. 3. Trace cash payments to general ledger and account payable master file. 4. Examine bank reconciliations.

5. Account for a sequence of cancelled cheques.
6. Reconcile recorded cash payment with the cash payments on the bank statement. 7. Review the cash payment journal, general ledger and accounts payble master file for large and unusual amounts.

Acquisitions
8. Trace entries the purchases journal to related vendors’ invoices, receiving reports and purchase orders. 9. Examine supporting documents as a part of test of acquisition. 10. Compare dates of receiving reports and invoices with dates in the acquistion journal. 11. Examine document package for indication of internal verification. 12. Account for a sequence of receiving reports and voucher packages.

Cash Payment

13. Trace cancelled cheque to the related cash payment journal entry and purchase journal entry and examine for payee name and amount. 14. Compare date on called cheque with bank cancellation date. 15. Trace individual entries in accounts payable master file to cash payment journal.