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AUDIT OF 
THE 
EXPENDITU 
RE AND 
DISBURSEM
NATURE: 
EXPENDITURE 
– acquisition of 
goods and 
services 
DISBURSEMEN 
T – payment of 
cash 
Financing 
and 
Conversion 
Cycle 
Revenue 
and 
Receipt 
Cycle 
Expenditu 
re and 
Disbursem 
ent Cycle
3 types of transactions 
associated with Revenue 
and Receipt Cycle: 
1.Purchase of goods and 
services (cash/credit) 
2.Payment of obligation 
3.Return of goods 
(cash/credit)
Types of 
documents used 
and accounting 
records: 
1.Purchase 
requisition 
2.Purchase order 
3.Receiving report 
4.Vendor’s invoice 
5.Vendor’s 
package 
journal 
7.Accounts 
payable 
subsidiary ledger 
8. Vendor 
statement 
9. Cash 
disbursement
Business Function of Revenue and Receipt 
Cycle: 
1.Purchase requisition 
Request for goods and services by an 
authorized individual 
Sent to supervisor/manager for approval. 
2. Purchasing 
Request is reviewed, a supplier selected, 
and a purchase order prepared 
Copies of purchase orders are sent to 
supplier, requisitioning department, 
Receiving, and Accounts Payable
3. Receiving 
Comparing of goods received and 
purchase order 
Receiving report is prepared 
4. Accounts payable 
File receiving reports with related 
purchase requisitions and purchase 
orders pending receipt of the vendor’s 
invoice 
Voucher package
4. Cash disbursements 
Review voucher packages for accuracy 
and authenticity before approving 
vouchers for payment and submitting 
vouchers for check printing 
Proper procedures for 
blank/voided/unused/drawn/signed 
checks, paid voucher packages, daily 
summary of remittances
Control Objectives and Fraud: 
1.Transaction Authorization 
Purchases should be initiated by user 
departments and approved by authorized 
supervisors/managers 
Suppliers should be approved by 
managers 
2. Transaction Execution 
Goods should be inspected for quality an 
quantities 
Control against improper disbursements 
Accounts payable has responsibility for 
verifying the propriety of acquisitions
3. Transaction Recording 
All goods and services received should 
be reported promptly to Accounts Payable 
and Purchasing 
Policies to assure that all purchases and 
cash disbursements are recorded properly 
and in the proper period 
2. Access to assets 
Pre-numbering and controlling forms and 
documents; maintaining lists and samples 
of authorized signatories; and segregating 
responsibility for authorizing, executing, and 
recording
CONTROL RISK ASSESSMENT 
Obtain an understanding 
1.Preliminary review 
2.System documentation 
3.Transaction walk-through 
4.Identification of control procedures
Test of Controls 
1.Purchasing 
2.Receiving 
3.Cash disbursement and Recording 
Reassess control risk and design 
substantive tests

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Audit of Expenditure and Disbursement Cycle

  • 1. AUDIT OF THE EXPENDITU RE AND DISBURSEM
  • 2. NATURE: EXPENDITURE – acquisition of goods and services DISBURSEMEN T – payment of cash Financing and Conversion Cycle Revenue and Receipt Cycle Expenditu re and Disbursem ent Cycle
  • 3. 3 types of transactions associated with Revenue and Receipt Cycle: 1.Purchase of goods and services (cash/credit) 2.Payment of obligation 3.Return of goods (cash/credit)
  • 4. Types of documents used and accounting records: 1.Purchase requisition 2.Purchase order 3.Receiving report 4.Vendor’s invoice 5.Vendor’s package journal 7.Accounts payable subsidiary ledger 8. Vendor statement 9. Cash disbursement
  • 5. Business Function of Revenue and Receipt Cycle: 1.Purchase requisition Request for goods and services by an authorized individual Sent to supervisor/manager for approval. 2. Purchasing Request is reviewed, a supplier selected, and a purchase order prepared Copies of purchase orders are sent to supplier, requisitioning department, Receiving, and Accounts Payable
  • 6. 3. Receiving Comparing of goods received and purchase order Receiving report is prepared 4. Accounts payable File receiving reports with related purchase requisitions and purchase orders pending receipt of the vendor’s invoice Voucher package
  • 7. 4. Cash disbursements Review voucher packages for accuracy and authenticity before approving vouchers for payment and submitting vouchers for check printing Proper procedures for blank/voided/unused/drawn/signed checks, paid voucher packages, daily summary of remittances
  • 8. Control Objectives and Fraud: 1.Transaction Authorization Purchases should be initiated by user departments and approved by authorized supervisors/managers Suppliers should be approved by managers 2. Transaction Execution Goods should be inspected for quality an quantities Control against improper disbursements Accounts payable has responsibility for verifying the propriety of acquisitions
  • 9. 3. Transaction Recording All goods and services received should be reported promptly to Accounts Payable and Purchasing Policies to assure that all purchases and cash disbursements are recorded properly and in the proper period 2. Access to assets Pre-numbering and controlling forms and documents; maintaining lists and samples of authorized signatories; and segregating responsibility for authorizing, executing, and recording
  • 10. CONTROL RISK ASSESSMENT Obtain an understanding 1.Preliminary review 2.System documentation 3.Transaction walk-through 4.Identification of control procedures
  • 11. Test of Controls 1.Purchasing 2.Receiving 3.Cash disbursement and Recording Reassess control risk and design substantive tests