Please enable JavaScript.
Coggle requires JavaScript to display documents.
The purchase and payment cycle - Coggle Diagram
The purchase and payment cycle
The purchases cycle:
3 distinct functions:
The receiving of goods (receiving of goods re-ordered)
Documentation:
- copy of PO, supplier delivery note(DN) and goods received note(GRN)
The recording of goods (record for accounting purpose)
Documentation: - supplier invoice, copy of PO, copy of GRN, DN from supplier, purchase journal and credit notes when goods are returned.
The ordering of goods (re-ordering of goods)
Documentation:
- Requisitions, list of approved suppliers, supplier price lists and purchase orders(PO's)
Control objectives:
- Validity, authorisation, completeness, accuracy, recording, classification and cut off.
Test of controls:
The following words should be present in test of controls sentences -
inspect, observe, enquire and reperform
.
The payment cycle
1 distinct function
The payment of creditors/accountable
3 functions
Drawing and signing of checks
Recording of payments
Control over cheque forms
Documentation:
- remittance advices, cheques, bank statements, cash payments journal
Substantive testing (audit) -
to see if the financial statements and supporting documentation contains any errors.
Financial statement assertions
= existence, completeness, rights and obligations, accuracy and valuation as well as presentation and disclosure.
Analytical procedures = provides more general/overall evidence
Test of detail = audit detail of transaction, account balance or disclosure