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