[Solved] ACC311 Assignment 1 Spring 2020
ACC311 Fundamentals of Auditing Assignment 1 Solution & Discussion Spring 2020
ACC311 Assignment 1 Solution Idea:
Credit: Muhammad Aaqib Saleem
What objectives you will ensure for performing tests of control?
To check internal controls of the purchases system of the XYZ Ltd. we need to bear in mind that 'purchases' has a wide meaning in terms of the purchases cycle as purchases will include not only inventory items but also all types of expense and the purchase of non-current assets
The control objectives are as follows. To ensure that:
- Purchased goods/services are ordered under proper authority and using proper procedures
- Purchased goods/services are only ordered as necessary for the proper conduct of the business operations and are ordered from suitable, approved suppliers
- Goods/services received are inspected for quality, quantity and description
- Invoices and related documentation are properly checked and approved as being valid before being entered as trade creditors
- All valid transactions relating to payables (suppliers' invoices, credit notes and adjustments), and only those transactions, should be accurately recorded in the accounting records.
What tests of control you will apply in respect of invoices related to credit purchases made by XYZ Ltd.?
TESTS OF CONTROL
As already noted, tests of control should be drawn up so as to check that control procedures are being applied and to achieve control objectives. One suggested way to design tests of control of invoices related to credit purchases made by XYZ Ltd is to list the documents in a transaction cycle and generate appropriate tests of control for each document.
An invoice will be Test for:
- Serial numbering
- Evidence of sequence check
- Evidence of matching purchase invoices with goods received notes and purchase orders.
- Evidence of checking casts, extensions and tax treatment
- Evidence of account coding.
- Initialing of invoice grid for work done.
- Approval of purchase invoice for further processing.