Ward Publishing Company — Part I (See p. 648 for Part II, and Case 19-28 on p. 673 for Part III) Tests of Controls and Substantive Tests of Transactions Audit Procedures for
Acquisitions and Cash Disbursements
1. Foot and cross-foot the acquisitions and cash disbursements journals for two months
and trace totals to postings in the general ledger.
2. Scan the acquisitions and cash disbursements journals for all months and investigate
any unusual entries.
3. Reconcile cash disbursements per books to cash disbursements per bank statement
for one month.
4. Examine evidence that the bank reconciliation is prepared by the controller.
5. Inquire and observe whether the accounts payable master file balances are periodi-
cally reconciled to vendors’ statements by the controller.
6. Examine evidence that the numerical sequence of checks is accounted for by someone
independent of the preparation function.
7. Inquire and observe that checks are mailed by D. Ward or someone under his supervi-
sion after he signs checks.
8. Examine initials indicating that the controller balances the accounts payable master
file to the general ledger monthly.
9. Select a sample of entries in the cash disbursements journal, and
a. Obtain related cancelled checks and compare with entry for payee, date, and amount
and examine signature endorsement.
b. Obtain vendors’ invoices, receiving reports, and purchase orders, and
(1) determine that supporting documents are attached to vendors’ invoices.
(2) determine that documents agree with the cash disbursements journal.
(3) compare vendors’ names, amounts, and dates with entries.
(4) determine whether a discount was taken when appropriate.
(5) examine vendors’ invoices for initials indicating an independent review of
chart of account codings.
(6) examine reasonableness of cash disbursements and account codings.
(7) review invoices for approval of acquisitions by Ward.
(8) review purchase orders and/or purchase requisitions for proper approval.
(9) verify prices and recalculate footings and extensions on invoices.
(10) compare quantities and descriptions on purchase orders, receiving reports,
and vendors’ invoices to the extent applicable.
