The Expenditure Cycle ( CHP 4 PART 2 )

The Expenditure Cycle ( CHP 4 PART 2 )

1. Definition : Activities that related to purchasing/payment of goods or services .

   • Activities that related to :  Puchasing/Payment of goods or services
   • Activities :
     • - ordering material,supplies,services
       • receive material,supplies,services
         • approving supplier invoices
           • cash disbursements
   • Threats
     • inaccurate/invalid master data
       • unauthorized disclosure sensitive info.
         • loss/destruction data
           • poor performance

2. Controls

   • data processing integrity controls
     • restriction of access to master data
       • access controls
         • backup & disaster recovery procedures

3. ORDERING

   • Threats
     • Inaccurate inventory access
       • purchasing items not needed
         • kickbacks
   • Controls
     • perpetual inventory system
       • price list
         • competitive bidding
           • review of purchase orders
             • budgets
               • supplier audits

4. RECEIVING

   • Threats
     • accepting unordered items
       • mistakes in counting
         • verifying receipt of services
           • theft of inventory
   • Controls
     • document transfer of goods to inventory
       • budgetary controls
         • audits
           • segregation of duties

5. Invoice Processing

   • Non-Voucher
   • Voucher
     • Advantages of Voucher System
       • - reduce number of checks
         • -can utilize pre-sequential-numbered v.system
           • allow for separation of invoice
   • Approving Invoices
     • THREATS
       • errors in supplier invoices
         • mistakes in posing to account payable
     • CONTROLS
       • verification of invoice accuracy
         • restriction of access to supplier master data
           • data entry edit controls

6. CASH DISBURSEMENT

   • THREATS
     • paying for items not received
       • duplicate payments
         • theft of cash
           • check alteration
             • cash flow problems
   • CONTROLS
     • cash flow budgets
       • requiring receipts for travel expenses
         • use of corporate credit cards ( travel exp )
           • cancelling all supporting doc. when payment is made
             • running petty cash as an imprest fund