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Fundamentals of Auditing

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Fundamentals of Auditing ­ACC 311
VU
Lesson 26
TESTING THE PURCHASES SYSTEM
Test for:
Purchase
(i)  Evidence of a sequence check.
Order
(ii)  Evidence of approval.
(iii)  Adherence to authority limits
Goods
Test f o r evidence of a sequence check
Received
Note
Goods
Test f o r evidence of a sequence check.
Returned
Note
Test for:
1. Serial numbering
2. Evidence of sequence check
Purchase
3. Evidence of matching purchase invoices with goods received notes and purchase
Invoice
orders.
4. Evidence of checking casts, extensions and tax treatment
5. Evidence of account coding.
6. Initialing of invoice grid for work done.
7. Approval of purchase invoice for further processing.
Credit Note
Test for evidence of matching credit notes to goods returned notes
Payables
Test for evidence of authorization of adjustments to payables ledge
ledger
Text for:
(i)
Evidence of review of reconciliation of purchase ledger listing.
Payables
(ii)
Evidence of authorization of adjustments to purchase ledger control account.
Ledger control
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Fundamentals of Auditing ­ACC 311
VU
CONTROL OBJECTIVES
The control objectives in respect of a wages and salaries system are as follows:
(a) Payment of wages and salaries should be made only in respect of the client's authorized employees.
(b) Payment should be made at authorized rates of pay.
(c) Wages and salaries payments should be in accordance with records of work performed, e.g. time, output,
commissions on sales.
(d) Payroll and payroll deductions (tax and social security) should be calculated accurately.
(e) Payment should be made to the correct employees.
(f)  Liabilities to the tax authorities for tax and social security should be properly recorded.
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Table of Contents:
  1. AN INTRODUCTION
  2. AUDITORSí REPORT
  3. Advantages and Disadvantages of Auditing
  4. OBJECTIVE AND GENERAL PRINCIPLES GOVERNING AN AUDIT OF FINANCIAL STATEMENTS
  5. What is Reasonable Assurance
  6. LEGAL CONSIDERATION REGARDING AUDITING
  7. Appointment, Duties, Rights and Liabilities of Auditor
  8. LIABILITIES OF AN AUDITOR
  9. BOOKS OF ACCOUNT & FINANCIAL STATEMENTS
  10. Contents of Balance Sheet
  11. ENTITY AND ITS ENVIRONMENT AND ASSESSING THE RISKS OF MATERIAL MISSTATEMENT
  12. Business Operations
  13. Risk Assessment Procedures & Sources of Information
  14. Measurement and Review of the Entityís Financial Performance
  15. Definition & Components of Internal Control
  16. Auditing ASSIGNMENT
  17. Benefits of Internal Control to the entity
  18. Flow Charts and Internal Control Questionnaires
  19. Construction of an ICQ
  20. Audit evidence through Audit Procedures
  21. SUBSTANTIVE PROCEDURES
  22. Concept of Audit Evidence
  23. SUFFICIENT APPROPRIATE AUDIT EVIDENCE AND TESTING THE SALES SYSTEM
  24. Control Procedures over Sales and Debtors
  25. Control Procedures over Purchases and Payables
  26. TESTING THE PURCHASES SYSTEM
  27. TESTING THE PAYROLL SYSTEM
  28. TESTING THE CASH SYSTEM
  29. Controls over Banking of Receipts
  30. Control Procedures over Inventory
  31. TESTING THE NON-CURRENT ASSETS
  32. VERIFICATION APPROACH OF AUDIT
  33. VERIFICATION OF ASSETS
  34. LETTER OF REPRESENTATION VERIFICATION OF LIABILITIES
  35. VERIFICATION OF EQUITY
  36. VERIFICATION OF BANK BALANCES
  37. VERIFICATION OF STOCK-IN-TRADE AND STORE & SPARES
  38. AUDIT SAMPLING
  39. STATISTICAL SAMPLING
  40. CONSIDERING THE WORK OF INTERNAL AUDITING
  41. AUDIT PLANNING
  42. PLANNING AN AUDIT OF FINANCIAL STATEMENTS
  43. Audits of Small Entities
  44. AUDITORíS REPORT ON A COMPLETE SET OF GENERAL PURPOSE FINANCIALSTATEMENTS
  45. MODIFIED AUDITORíS REPORT