PURCHASES AND PURCHASE RETURN Control Objective Controls by Management Test of Controls Occurrence and existance Recorded purchases represent goods and services received. Authorisation procedures and policies in place for ordering goods and services. Inspect policies and procedures and inquire about them. Segregation of duties. Observe and evaluate segregation of duties Purchase orders raised for each purchase and authorised by appropriate senior personnel. Examine a sample of purchase orders to ensure they have been appropriately authorised. Review the delegated list of authority for purchases. Approved purchase order for each receipt of goods For a sample of orders, examine the goods received note (GRN) and match it to the order. Staff receiving goods check them to the purchase order Observe receipt of goods by staff to confirm whether the check is done Stores clerks sign for goods received. Inspect a sample to confirm whether stores staff undertake this check. Purchase orders and GRNs are matched with the suppliers’ invoices Examine supporting documentation for a sample of invoices Completeness All purchase transactions that occurred have been recorded. Purchase orders and GRNs are matched with the suppliers’ invoices. Examine supporting documentation for a sample of invoices Periodic accounting for prenumbered GRNs and purchase orders. Review entity’s procedures for accounting for prenumbered documents. Independent check of amount recorded in the purchase journal Examine application controls. Examine documentation for evidence of this check. Accuracy, classification and valuation Purchase transactions are correctly recorded in the accounting system. Purchase orders and GRNs are matched with the suppliers’ invoices Examine supporting documentation for a sample of invoices Mathematical accuracy of the supplier’s invoice is verified. Recalculate the mathematical accuracy of a sample of suppliers’ invoices. Amount posted to general ledger is reconciled to the purchases ledger. Review reconciliations for evidence of this check. Chart of accounts in place. Review purchases journal and general ledger for reasonableness. Rights & Obligations Recorded purchases represent the liabilities of the entity. Purchase orders and GRNs are matched with the suppliers’ invoices. Examine supporting documentation for a sample of invoices. Cut off Purchase transactions are recorded in the correct accounting period. All goods received reports forwarded to accounts payable department daily. Compare dates on reports to dates on relevant vouchers. Procedures in place that require recording of purchases as soon as possible after goods/services received. Compare dates on vouchers with dates they were recorded in the purchases journal INVENTORIES Control Objective Controls by Management Test of Controls
Monthly bank reconciliations prepared and reviewed. Review reconciliations to confirm whether undertaken and reviewed. Only authorised staff can make electronic cash payments and issue cheques. Review delegated list of authority for cash payments Electronic cash payments and cheques prepared only after all source documents have been independently approved. Inspect relevant documentation for evidence of approval by senior personnel. Completeness All cash payments that occurred are recorded. Segregation of duties Observe and evaluate proper segregation Supplier statements independently reviewed and reconciled to trade payable records. Review procedures for reconciling supplier statements. Monthly bank reconciliations prepared and reviewed. Review reconciliations to confirm whether undertaken and independently reviewed. Review of cash payments by manager before release. Inspect sample of listings for evidence of senior review Daily cash payments reconciled to posting to payable accounts. Review a sample of reconciliations for evidence that they have been done. Use of prenumbered cheques. Examine evidence of use of prenumbering Accuracy, classification and valuation Cash payments recorded correctly in the ledger. Reconciliation of daily payments report to electronic cash payment transfers and cheques issued. Supplier statements reconciled to payable accounts regularly. Monthly bank reconciliations of bank statements to ledger account. Review reconciliation, to ensure performed, reviewed and any discrepancies followed up on a timely basis. Review reconciliations for a sample of accounts. Review bank reconciliation for evidence it was done and independently reviewed. Cash payments posted to correct payable accounts and to the general ledger. Supplier statements reconciled to payable accounts regularly. Review reconciliations for a sample of accounts Agreement of monthly cash payments journal to general ledger posting. Review postings from journal to general ledger Payable accounts reconciled to general ledger control account Review reconciliation, to ensure performed, reviewed and any discrepancies followed up on a timely Cut-off Cash payments are recorded in the correct accounting period. Reconciliation of electronic funds transfers and cheques issued with postings to cash payments journal and payable accounts Review reconciliation and check it is carried out regularly. Presentation and disclosure assertions Cash payments are charged to the correct accounts. Chart of accounts Review cash payments journal to assess reasonableness of charging of accounts. Independent approval and review of general ledger account assignment. Review assignment of general ledger account. Sales Cycle