Question

In: Accounting

test controls on purchases ,sales,fixed assets and creditors.

Expert Solution

Audit procedures are performed by auditors on internal controls of business , to ensure that the proper sytems of internal controls are in place .

Test of internal controls also reduces the need for substantive audit procedures to be performed by auditor.

1. Testing Controls on purchases :

Purchases are one of the major element of business operations.

To test the internal controls related to purchase:

An auditor should check if there is proper authorisation system is in place for purchases.

whether all the purchase requisitions are properly authorise by the person of responsibility.
Whether are purchse order are made by the authorised person.

Auditor also needs to check for the payment made for purchases .

Whether payments are matching with the invoice amounts .
and payments are properly authorised by the department head.

2. Testing Controls on Sales :

Sales is the primary source of revenue of the business . its the major focus area of any business.

To test the internal control related to Sales:

An auditor must check for the assertions of Occurance, Completeness , Cutoff .

Whether a proper system is in place to record all sales properly.
Whether proper bills are generated for all the sales made.
whether proper internal control system is in place to collect the amount of sales.

3. Testing Controls on Fixed Assets :

Fixed assets are widely used in a business to generate revenue .

thus it becomes important for auditor to test the internal controls,

regarding the recording , maintaining and valuation of assets.

Whether assets are properly recorded as per the accounting standards.
Whether proper sytem is in place for maintenance of assets and
whether proper accounting system is in place to record for any depreciation on assets and any sale or immpairment.
whether assets are physically checked time to time for their existence.
whether proper valuation system is in place for fixed assets .

4. Testing Controls on Creditors :

Auditor needs to ensure whether there are proper internal controls related to creditors , such as,

Whether proper approval process for all the invoices is in place.
whether there are any chances of invoice duplicating.
whether paid invoices are duly cancelled by person making payments.
whether payments are duly authorised.
whether proper system of credit and timely payment is in place.

~~~~~~~Please upvote . Thanks .

ekkarill92 answered 2 years ago

Analytical procedures of controls in auditing purchases ,sales,fixed assets and creditors.

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