Questions 1 through 9 are typically found in questionnaires used by auditors to obtain an understanding of internal control in the acquisition and payment cycle. In using the questionnaire for a client, a “yes” response to a question indicates a possible internal control, whereas a “no” indicates a potential deficiency.
1. Is the purchasing function performed by personnel who are independent of the re-
ceiving and shipping functions and the payables and disbursing functions?
2. Are all receiving reports prenumbered and the numerical sequence checked by a person independent of check preparation?
3. Are all vendors’ invoices routed directly to accounting from the mailroom?
4. Does the accounts payable clerk match the description and quantities of goods on the purchase order, receiving report, and vendor’s invoice?
5. Does a responsible employee review and approve the invoice account distribution
before the transaction is entered in the computer?
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Chapter 18 / AUDIT OF THE ACQUISITION AND PAYMENT CYCLE 641
6. Are all extensions, footings, discounts, and freight terms on vendors’ invoices checked for accuracy?
7. Are checks automatically posted in the cash disbursements journal as they are
prepared?
8. Are all supporting documents properly cancelled at the time the checks are signed?
9. Is the custody of checks after signature and before mailing handled by an employee
independent of all payable, disbursing, cash, and general ledger functions?
a. For each of the preceding questions, state the transaction-related audit objective(s)
being fulfilled if the control is in effect.
b. For each internal control, list a test of control to test its effectiveness.
c. For each of the preceding questions, identify the nature of the potential financial
misstatement(s) if the control is not in effect.
d. For each of the potential misstatements in part c., list a substantive audit procedure
that can be used to determine whether a material misstatement exists.
