Audit of the Acquisition and Payment Cycle Tests of Controls, Substantive Tests of Transactions, ...

This is our discussions with the simplest way possible about Audit of the Acquisition and Payment Cycle: Tests of Controls, Substantive Tests of Transactions, and Accounts Payable.

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[danandreibongo]

This video may be similar to the last two chapters but there is still a significant difference between them. It varies on one's perspective integrated by the auditor. Thus, I have learned the following whilst watching the video:

First, I have learned the controls and substantive tests of transactions for acquisition with respect to management assertions. First, the occurence, where it is necessary to make sure the recorded acquisitions have existed. Then completeness, where all the existing acquisitions must be recorded. Next, accuracy, in which make sure that the values presented in the financial statements are accurate. Then, posting and summarization, or making sure it is properly included in the ledger and summarized on the trial balance. Then, classification in which entails onto what type of accounting elements, whether long-term or short term, current or non-current. Lastly, the timing, the transactions should be recorded in the correct dates.

The next thing I learned is about the business functions or areas involved in the acquisition and payment cycle and the various related documents and reports associated in each function. The following are: the processing of the purchase order and this involves the purchase requisition and purchase order as the important documents; receiving goods and services accompanied by the receiving report; recognition of liability evidenced by the vendor’s invoice and voucher among other documents; and, processing and recording cash disbursements as evidenced by checks issued, cash disbursement transactions file and cash disbursements journal or listing.

Lastly, I was able to learn that when performing audit of acquisition and payment cycle, one must use attributes sampling. It is advised because there is a need for tests of controls and substantive tests of transactions for acquistions and cash disbursement. Additionally, the acquisition and payment cycle is not the same as to the others because requires a huge amount with large number of transactions and significant judgment.

[cendycabatingan]

After watching the video about the Audit of the Acquisition and Payment Cycle: Tests of Controls, Substantive Tests of Transactions, and Accounts Payable. The following points that I have learned are:

Firstly, I was able to understand the acquisition and payment cycle transactions. There are three types of transactions in this scenario: First, the purchase of goods and services, such as the purchasing of raw materials, equipment, and the like, results to expenses. Second is the disbursement of cash which another term for payments and ultimately the purchase returns and allowances and purchase discounts.

Secondly, I learned that planned reliance on controls defines the scope of testing controls. When testing is required to give an opinion on internal control over financial reporting, it must be adequate. Also, I learned in testing controls, the auditor defines internal controls and vulnerabilities, assesses control risk, and conducts test controls so that the auditor can obtain proof that testing controls are working effectively and efficiently.

Finally, I learned that acquisitions and payment period transactions have a higher number of transactions, requiring considerable judgment, and in contrast to other factors, it encompasses a wide variety of dollar amounts. Moreover, I learned the methodology for designing tests of the balance of accounts payable. Which identifies client business risk, sets performance materiality, and assesses inherent risk. Since accounts payable is riskier for misstatement. Also, there is a need to perform a test of controls and substantive test of transactions, and lastly, a need to perform analytical procedures.

[flairpatindol]

Here are some of the learnings that I gained after watching this video.
First, I have learned the business functions in the cycle. It will start in processing the purchase orders that will be sent to the vendors. After that, the business will received the goods and services and then it will sign the delivery receipt. Next, the entity will recognized the liability once the vendors sent the sales invoices together with the billing statements. Lastly, it will be processed and disbursed accordingly. In addition, I have also learned that it is important to determine the extent of tests of controls. The auditor should identify the key internal controls and weaknesses to be able to assess the control risk that is present in the business, test of controls is also performed in order to obtain evidences that the controls are operating effectively.

Second, I have learned the controls and substantive tests of transactions for acquisition with respect to management assertions. a.) occurence, there is a need for us to make sure that the recorded acquisitions existed as they are connected to the goods and services received by the business. b.) completeness-all existing acquisitions should be recorded. c.) accuracy-we have to make sure that the values presented in the financial statements are accurate. d.) posting and summarization- they should be properly included in the ledger and summarized on the trial balance on the whole accounting process. e.) classification- classifying what type of accounting elements, is it long-term or short term, current or non-current. f.) timing-it should be recorded in the correct dates.

Third, I have learned that attributes sampling is commonly used in audit of acquisition and payment cycle because there is a need for tests of controls and substantive tests of transactions for acquistions and cash disbursement. Moreover, I have also grasped the differences of the acquisition and payment cycle to others and these are: it requires larger number of transactions, significant judgment, and a wide range of dollar amount.

[donnarosecompra]

Upon watching this discussion video, I have noted key points that I have learned. First, although the audit objectives were similar to that of the sales and collection cycle, there is a significant difference as to the perspective that one has to take in the audit procedure. Where the sales and collection cycle involves the client as the seller or vendor, in this video for acquisition and payment cycle, the client is the customer. This perspective is important for us to know the accounts and classes of transactions that are affected or involved in the acquisition and payment cycle and this includes cash in bank, accounts payable, purchase returns and allowances, property, plant and equipment, raw material purchases and various expenses among others.

Second, I was able to take note as a review of the business functions or areas involved in the acquisition and payment cycle and the various related documents and reports associated in each function. This includes the following: (a) the processing of the purchase order and this involves the purchase requisition and purchase order as the important documents; (b.) receiving goods and services accompanied by the receiving report; (c.) recognition of liability evidenced by the vendor’s invoice and voucher among other documents; and (d.) processing and recording cash disbursements as evidenced by checks issued, cash disbursement transactions file and cash disbursements journal or listing.

Finally, I have learned that there is a significant difference in this cycle as compared to that of other cycles because if usually involves larger numbers of transactions, requires significant judgment due to its wide range of amounts of the different transactions involved. This is probably one of the most important realization that I got from this video that did help me understand the general concept behind the audit of the acquisition and payment cycle.

[vincejuliusduaban]

In this video, I learned about the following points:


Firstly, I learned about the three classes of transactions regarding the acquisition and payment cycle namely, acquisition of goods of goods and services, cash disbursements and purchase returns and allowance and purchase discounts. Acquisition of good and services involve purchasing materials or assets from suppliers or receiving services. After acquisition, you pay the vendors and usually when you purchase, it is possible that there would be purchase returns and allowance due to certain defects or issues of products and of course purchase discounts will be deducted when you avail the discount offered.
Secondly, I learned about the business functions in the cycle. First, we need to process the purchase order. This involves preparing the purchase requisition which includes the materials or assets that a certain department needs with authorization and approval. After that, we prepare the purchase order and sent to the vendor or supplier. After that, the supplier will deliver the goods and then we will receive the goods or services. After receiving, we will recognize the liability after we receive the vendor’s invoice together with the billing statement and lastly is the processing and recording of cash disbursements.
Lastly, I learned about the controls and substantive test of transactions for acquisitions with respect to management assertions. First is occurrence, we have to make sure that recorded acquisitions for goods and services exists and these existing transactions are recorded which manifests completeness. Next is accuracy, we have to make sure that acquisition is accurately recorded with respect to amounts or values presented in the financial statements. Posting and summarization manifest that acquisitions are correctly posted in the ledger and summarized in the trial balance and financial statements. Then, these accounts must be correctly classified in terms of current and non-current. Lastly is timing, transactions must be recorded in correct dates.

[ariellusares]

These are some of my learning points to the video:
1. I learned the three classes of transactions which are the (1)acquisition of goods and services, (2) cash disbursements, (3)purchase discounts, and purchase returns and allowances. Wherein these three transactions, occur and affect accounts in payment cycles.
2. I learned the step-by-step process of the business functions in the acquisition and payment cycle. Start with the processing purchase orders; it is a list of the products providing its quantity and price that the company willing to pay. After that, the organization will receive the goods and services and then it will issue a receiving report. The recognition of the liability on the part of the buyer. The next thing is the report will be sent to the accounting department, specifically the accounts payable department, and journal entries will be reported.
3. I learned about the procedure for designing controls and substantive tests. The first step in this procedure is to understand the internal control-acquisitions and disbursements. Essentially, understanding how the business’s internal control and generally how the business works is one of the most important things when auditing.

[honeymienamit]

After watching this video, I have learned certain key points:

Firstly, I realized that there is really a difference as to the perspective being pointed out in this chapter which is the customer or buyer, as compared to the previous chapter which is the seller. With regards to this, I have learned the functions in the cycle from processing purchase order, to receiving goods and services, which in turn will be the recognition of the liability account, and then lastly to processing and recording of cash disbursement or payment.

Secondly, it has also been discussed the substantive tests of transactions for acquisitions namely: (1)Occurence- recorded acquisitions are for goods and services received. (2)completeness- existing acquisitions are recorded. (3)accuracy - acquisitions are accurately recorded. (4)posting and summarization- acquisitions are correctly included in the master files, (5)classification - acquisitions are correctly classified, (6)timing- acquisitions are recorded on the correct dates.

Lastly, I have learned that the difference of Acquisition and payment cycle transactions is that it has a larger number of transactions which basically would require significant judgment, and finally a wide range of dollar amount due to its extensive activities and large transactions. Overall, I learned a lot in this video. Thank you so much sir.

[andreaenovero]

In this video, I have learned the following concepts:

First, I have learned that the Acquisition and payment cycle involves the activities associated with the acquisition and payment of goods and services, plant assets, and labor. For a trading concern, the three classes of transactions in this cycle are acquisitions of goods and services, cash disbursements and purchase returns and allowances, and purchase discounts. Acquisition of goods and services. The accounts affected by the Accounts and Payment Cycle are purchases, accounts, and notes payable - trade, purchase returns and allowances, cash in bank, purchase dic=scounts, inventories, and manufacturing and operating expenses requiring cash payments.

Second, I have learned that transactions typically classified in the acquisition and cash disbursements cycle through these business activities/functions, these are the following: (1) Processing purchase orders (2) Receiving goods and services (3) Recognizing the liability (4) Processing and recording cash disbursements. The first step in this cycle is to order materials, supplies, and services for the company. Once an order was created, the purchasing department will approve the request and the purchase order will be made. After processing the purchase order, the receiving department will accept the supplies and materials. The company's accounts payable department will recognize liability after the company receive the goods and approve the vendor invoices. After recognizing the liability, it will be recorded and disbursed accordingly.

Lastly, I have learned the related documents and reports in processing purchase orders, these are purchase requisition and purchase order. Purchase requisition provides evidence that the purchasing department was authorized to initiate a purchase. A purchase order contains the signature of the employee who authorized purchase from a vendor. After purchasing, receiving report will be made which means the report that is prepared within the entity and provides evidence that goods were received. The documents in recognizing liability are the vendor's invoice, debit memo, voucher, and vendor's statement. The vendor's invoice is created externally and provides evidence about a purchase of goods and services. A debit memo is a prenumbered document indicating a reduction in the amount owed to a vendor because of returned goods. The voucher provides documentation for the recording of a transaction. The vendor's statement may be used to determine that all transactions recorded on the statements have been recorded in the books.

[MsNeverMarie]

After watching the video, I have acquired another information and have been reviewed the following:
First, I looked back on the acquisition and payment cycle and through the illustration and discussion in the video I get to see what accounts and the classes of transaction in the acquisition and payment cycle. To which the three classes of transactions are: (1) acquisition of goods and services; (2) cash disbursements and (3) purchase discounts and purchase returns & allowances. Also, compared to the audit of accounts receivable, this audit involves a lot more accounts such as accounts payable, purchase returns and allowances, purchase discounts, and different expenses control accounts.
Second, the video deepened my understanding on what accounts are in the classes of transactions in the acquisition as well as payment cycle. Moreover, I get to see through the business functions in the cycle, that way also I get to see the bigger picture and be able to audit such cycles that involves test of controls, substantive test of transactions and accounts payable.
Third, in connection to auditing I get more acquainted to the relevant documents needed to audit and perform substantive tests on the accounts and transactions. Thus, I get to walkthrough the methodology for test of controls and substantive tests conducted on transactions and accounts payable.
Overall, a lot of familiar terms based on my past learnings and there are also a lot to digest and apply, still, I get to build a foundation on auditing and ways to conduct test of controls and substantive tests as well as on the accounts payable which are involve in the acquisition and payment of cycle.

[brianenero]

In this discussion, the opposite perspective of the previous video is shown. In this discussion, we looked at the audit process in the perspective of the buyer, in contrast to the preceding video which was in the seller’s perspective. In this video, I learned about the following things:
1. I understood the process of the business functions in the acquisition and payment cycle. The process starts off with the processing of the purchase orders, then the receipt of the goods and services, then the recognition of the liability in the part of the buyer (the company), and then the processing and recording of cash disbursements. Within these processes, various documents and accounts are affected and are interlinked with the accounts payable account.
2. I learned about how the accounts payable is sensitive and has many intercorrelations with a number of other accounts. This means that the accounts payable is vulnerable to misstatements due to the fact that it is composed of amounts coming from other accounts as well. A misstatement from another account could gravely cause a misstatement to the accounts payable account as well, hence the need for the audit tests to ensure the correct presentation of the accounts payable.
3. I learned about the methodology for designing controls and substantive tests, particularly the first step in this methodology which is to understand the internal control-acquisitions and disbursements. I realized how important this is through other subjects as well. Understanding how the business’s internal control and generally how the business works is a must when auditing. In this step, we can identify the possible accounts that are prone to misstatements and are very vulnerable to fraud.

[mcevansherana]

This is the video about the audit of the acquisition and payment cycle, substantive tests. I absorbed the following:

First, I learned that in transactions on the acquisition of payment cycle, there are three classes namely:
1.) Acquisition of Goods & Services
2.) Cash disbursements
3.) Purchase Returns & allowances.

Second, I learned about the chronology of the business functions in the acquisition and payment cycle. The steps are following:
1.) Processing Purchase Order
2.) Receiving Goods & Services
3.) Recognizing the liability
4.) Processing and recording cash disbursements.

Third, I also learned some of the documents that we need to have to do a certain process. For example, in purchasing, we need to have purchase requisition and purchase order and if we are receiving goods and services, we need to have the receiving report.

These are just some of the things that I've learned in the video. Thank you sir and God Bless.

[bernadinedeme]

Three important learning points from this video discussion:

In the Acquisition and Payment Cycle, there are three classes of transactions. These are the following: (1) Acquisitions of goods and services - which only not includes the purchase of tangible assets but also intangible ones talking of services; (2) Cash disbursements - or another term for payments, and; (3) Purchase returns and allowances and purchase discounts - For the returns and allowances, of course, it is when certain goods will be returned to the vendor because of defects and discounts are deductions in payments.

Also taken note of the business functions in the cycle of APC. First is the processing of purchase orders. After which, the documents (purchase orders) will be delivered to the seller/vendor and we'll receive the goods and services. After receiving the delivery receipt, we will be recognizing the liability. After all the necessary documents and reports are received or presented, the liability will be processed and we'll record cash disbursements.

I have also learned the difference of this cycle from the other cycles discussed previously. APC requires significant judgment since we are dealing with huge amounts and larger and variety of transactions. Probably this is one of the most important note to remember from this topic.

Thank you for this, Sir! God bless!

[daveisraelcajes]

The following are some of thoughts and learnings I realized after watching the video:

First, I learned that there are 3 classes of transactions which consist (1) Acquisition of goods and service - which includes purchasing of materials, inventories, PPEs and acquiring goods needed for business. (2) Cash Disbursement - which includes the outflow of cash to creditors or the providers of the company. (3) Purchase discount and returns- this consist the goods that have been acquired by the company and returned to seller for some valid reasons that may include the quality and quantity of the goods.

Second, I learned about the business function cycle which actually demonstrate the cycle of purchasing goods up to disbursement of it's amount. Its first step includes the processing of purchase orders to be approved by purchasing department, next will be the receipt of goods and followed by recognizing the liability of the goods received and lastly the processing of cash disbursement of the amount of that goods.

Lastly, I learned that there are important documents that are used in the process of purchasing goods and services up to disbursement of the amount of goods or services, this may include the purchase requisition, purchase order, receiving report, invoices, debit memo. Etc.

[johnmichaelyanoyan]

In the discussion of an audit of the Acquisition and Payment Cycle: Tests of Controls, Substantive Tests of Transactions, and Accounts Payable, these are the learning points that I've gained:
First, about the step-by-step process of the business functions in the acquisition and payment cycle. It will start in:
1. Processing of the purchase orders- it is a list of the product to purchase, the quantity to order, and the price the company is willing to pay.
2. Once the ordered goods have been received by the next department, the company issues a receiving report.
3. The report will be sent to the accounts payable team in the accounting department.
4. The journal entry to accounts payable is recorded.
Finally, the payment is processed by a treasury, and the cash is actually paid out.

Second, I learned about First the three classes of transactions in the acquisition and payment cycle. These classes of transactions are important and must be studied thoroughly, namely:
a. Acquisition of goods and services
b. Cash disbursements and purchase returns and
c. Allowances and purchase discounts

Lastly, I realize that an auditor must first identify the key internal control of the business so that he/she can determine the weaknesses and assess its control risk this will help the auditor to obtain more reliable evidence that would support the data gathered about the controls used.

[micheleancarmelotes]

The video is all about the audit in Acquisition and payment cycle, the following are the points of which I extracted from the video.

First, I have learned the three class of transaction in payment cycle, the acquisition of goods and services, cash disbursements or payments, and puchase returns, allowances and discount. These transactions will have impact in accounts like cash, accounts payable and puchase discounts, allowances and returns. In the video I was able to understand the flow related to payments. It will start as a purchase order, then the vendor will review the goods and services, then the buyer will now recognize a liability and record it finally. In each steps there are documents involve and it will be used for analyzing and reviewing of transactions later on done by auditors.

Second, I was able to know the steps in auditing related accounts payable. The auditor will understand the internal control ( study flowcharts, reviewing internal control questionaire and perform walk through tests); next, the auditor will assess the control risk (looking for the documents fo aunthorization of purchase and payments, and looking for segregation of asset custody); last, is to determine the extent test of controls ( identifying the weakness and performing test of control).
Lastly, I was able to understand how to do control and subtantive test. Auditor must look into the occurence of the recorded acquisitions; look into completeness that all acquisitions are really recorded; look into accurancy of amounts recorded; look into the summarization, classification and the timing (recorded in correct dates).

[christinejoylanaban]

As for this discussion, these are my learnings:
First, I have learned the three classes of transactions in the acquisition and payment cycle which are the acquisition of goods and services, cash disbursements, and purchase returns and allowances and purchase discounts.
Second, I learned that APC transactions are different from others in which they are larger in number of transactions, they have significant judgment, and have wide range of dollar amount.
Third, in determining the extent of testing of controls, I learned that auditors must identify first the key internal controls and weaknesses and then assesses the control risk. They should also perform tests controls to obtain evidence that the controls are operating effectively.

[raffyrossquijano]

In this video about the audit of the acquisition and payment cycle, the following are my learning points:

First, the notable three classes of transactions in this matter which are the acquisition of goods and services, the cash disbursement or payment related to that acquisition, and the related purchase returns and allowances and purchase discounts.

Secondly, I was able to recall regarding the topic of business functions in this cycle and its related documents as well. The process includes (1) processing the purchase order which involves the purchase order requisition slip and the purchase order, (2) receiving goods and services which involves the receiving report, (3) the recognition of the liability which involves vendors’ invoice, debit memo, and many other documents, (4) the processing and recording the cash disbursements which involves check, cash disbursements transaction file, cash disbursements journal or listing.

Third, I learned that this cycle, acquisition and payment, involves higher number of transactions which are requiring considerable judgment for its wide range of amounts in its transactions.

[angelaconde]

These are the important points I obtained from this video:

First, I was able to identify the three classes of transactions; acquisitions of goods and services, cash disbursements, purchase returns and allowances and purchase discounts. The acquisition of goods and services includes the acquisition of such things as raw materials, equipment, supplies, utilities, repairs and maintenance, and other services which to be considered as the company's expenses.

Second, I have understood the acquisition and payment cycle which typically begins with the initiation of a purchase requisition or processing of purchase orders followed by the receiving of goods and services and recognizing the liability. This cycle ends with payment on accounts payable where you process and records cash disbursements.

Last, I have learned that tests of controls and substantive tests of transactions for the acquisition and payment cycle receive a considerable amount of attention. The methodology for designing controls and substantive tests in this transactions involves an auditor being able to understand internal control for the acquisition and cash disbursement. After auditors identify key internal controls and deficiencies, they assess control risk. They determine the extent of testing controls afterwards. In order to meet the transaction-related audit objective, auditors design test of controls and substantive test of transactions which involves audit procedures, sample size, items to select and timing.

[sismaeanndenoso]

In this video discussion, the following are my learnings regarding the Audit of the Acquisition and Payment Cycle:

First, in determining the extent of control testing, I learned that the auditor must first identify the key internal control of the business so as to distinguish its weaknesses and assess its control risk, as this would help one to obtain evidences that will convey that such controls perform effectively.

Second, I get to distinguish the difference between the Acquisitions and Payments Cycle with the other cycle done in a business operation. I learned that the APC cycle involves a significant judgment as it deals with greater capacity of amounts and transactions unlike the other cycles. Moreover, I learned what it means to perform an out-of-period liability test, as this involves checking of whether the transactions for the fiscal year are indeed included in one's business' end of year financial statements such as its subsequent cash disbursement and unpaid bills.

Third, I was introduced to the methodology for designing test of balance for Accounts Payable which basically involve three phases. I able to grasp that the first phase of this approach involves identifying the client's business risk that affects the Accounts Payable. This procedure is important as there are some businesses that are riskier to deal with and thus the setting of performance materiality and inherent risk as well as the assessing of its control risk helps improve the overall financial performances of the business. Furthermore, the second phase involves in performing substantive test to it up to the last phase of implementing analytical procedures for the balance of Accounts payable.