The Expenditure Cycle

In: Business and Management

Submitted By ahnieszka
Words 318
Pages 2
I am going to describe the testing for control over the expenditure cycle.
The expenditure cycle starts with the purchase requisition. The department in need of the service or assets sends a properly approved, serially numbered requisition to the purchasing department.
The risk associated with the purchase requisition is that anyone could potentially make a purchase requisition order for any kind of amount.
Therefore, to mitigate a risk associated with the purchase requisition, it is very important to have the right personnel to approve the purchase order.
When I tested the expenditure cycle, I randomly chose the purchase requisition and I followed every step associated with that cycle and in In addition, I documented every step of my testing by describing every significant detail related to my testing. Also, I performed walkthrough by talking to the right personnel and asking them questions associated with my testing. That help me not only to better understand the entity’s business cycle but made my testing more reliable since I could determine appropriate segregation of duties among the personnel.

The purchasing department should place the order after giving proper consideration to the time and quantity to order. The purchasing department should also obtain competitive bids from various suppliers to make sure the best price is obtained. The purchase order is issued only after proper approval.
For the internal control purposes, it is best that prenumbered purchase order be used. There should be multiple copies that will be used to the requisitioning department, the vendor, the receiving department and the accounting department
The copy of the purchase order sent to the receiving department serves as an authorization to accept the goods when they arrive. A receiving report is prepared by this department and forwarded to accounting department. The goods are…...

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