Assignment: Over the past year, it has been determined that there may be some control issues in each of the major transaction cycles. The following is a chart of each cycle with the areas of concern identified. (Already have been pre-selected)
Transaction Cycles/Areas of Concern
1.)The procurement and payment cycle
There were 4,000 purchase orders that totaled $55 M for raw material. There is concern that not all purchases were completed using formal purchase orders, receipts did not match payment authorizations, and purchase orders were missing.
2.)The sales and cash receipt cycle
There were 15,000 invoices totaling $122 M in sales. Unauthorized discounts applied to invoices, credit terms applied to invoices may be incorrect, and unaccounted for invoice sequence numbering may be present.
For the transaction cycles complete the following:
- Determine the appropriate methodology for designing tests of controls and substantive tests of transactions.
Submit a 1-page chart with the following column headings:
|
Transaction-Related Audit Objective |
Key Internal Control |
Common Test of Control |
Common Substantive Test of Transactions |
In preparation for the year-end audit at Bovar Company, you will create a presentation to management for its approval. Complete the following:
- Present the methodology that he or she developed for his or her transaction cycle which should address the aforementioned control issues.
- How to address the identified control issues.
- Provide an outline regarding the methodology for the 2 major transaction cycles selected and complete the following:
- Designing tests of controls
- Designing substantive tests of transactions
All information should be compiled into one cohesive presentation. (400–500 words, 8–10 slides (not including cover and references) with notes) Please include references.
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