Chapter 10 THE ACQUISITION CYCLE

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Chapter 10THE ACQUISITION CYCLEPURCHASE
INVOICES AND PAYMENTS
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Overview of the Process for Recording Invoices
and Making Payments

• Documenting the process for recording invoices
  and making payments
• Identification of Events
• Record supplier invoice
• Select invoices for payment
• Approve payment
• Prepare checks
• Sign checks
• Complete payment

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Overview of the Process for Recording Invoices
and Making Payments

• Documenting the process for recording invoices
  and making payments
• Annotated narrative and workflow table
• Overview and detailed activity diagrams

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Overview of the Process for Recording Invoices
and Making Payments

• Documenting the data design
• Events and tables used
• Data design

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Overview of the Process for Recording Invoices
and Making Payments

• Risks and controls in recording invoices and
  making payments
• Execution risks
• Unauthorized payment
• Cash not paid or paid late
• Wrong amount paid
• Wrong supplier paid

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Overview of the Process for Recording Invoices
and Making Payments

• Risks and controls in recording invoices and
  making payments
• Information system risks
• - Recording risks
• Recorded an event that never occurred
• Event not recorded, recorded late, or unintended
  duplication of recording
• Event data item not recorded correctly

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Overview of the Process for Recording Invoices
and Making Payments

• Risks and controls in recording invoices and
  making payments
• Information system risks
• - Recording risks
• Wrong type of product or service recorded
• Wrong quantity or price recorded
• Wrong external or internal agent recorded
• Wrong recording of other data items that are
  stored in event records

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Overview of the Process for Recording Invoices
and Making Payments

• Risks and controls in recording invoices and
• making payments
• Information system risks
• - Update risks
• Update of master record omitted or unintended
  duplication of update
• Update of master record occurred at the wrong
  time
• Summary field updated by wrong amount
• Wrong master record updated

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Overview of the Process for Recording Invoices
and Making Payments

• Risks and controls in recording invoices and
  making payments
• Controls
• Workflow controls
• Segregation of duties
• Use of information from prior events to control
  activities
• Required sequence of events
• Follow-up on events

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Overview of the Process for Recording Invoices
and Making Payments

• Risks and controls in recording invoices and
  making payments
• Controls
• Workflow controls
• Sequence of prenumbered documents
• Recording of internal agent(s) accountable for an
  event in a process
• Limitation of access to assets and information
• Reconciliation of records with physical evidence
  of assets

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Overview of the Process for Recording Invoices
and Making Payments

• Risks and controls in recording invoices and
  making payments
• Controls
• Input controls
• Drop-down or look-up menus
• Record checking of data entered
• Confirmation of data entered
• Referential integrity controls
• Format checks to limit data

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Overview of the Process for Recording Invoices
and Making Payments

• Risks and controls in recording invoices and
  making payments
• Controls
• Input controls
• Validation rules to limit the data
• Defaults from data entered in prior sessions
• Restriction against leaving a field blank
• Field established as a primary key

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Overview of the Process for Recording Invoices
and Making Payments

• Risks and controls in recording invoices and
  making payments
• Controls
• Input controls
• Computer-generated values entered in records
• Batch control totals taken before data entry
  compared to printouts after data entry
• Review for errors before posting
• Exception reports

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Using Accounting Applications for Recording
Invoices and Making Payments

• Record purchase invoice
• Process
• Step 1 Accumulate a batch of invoices
• Step 2 Enter each invoice
• Step 3 Print an edit report
• Step 4 Review report and make corrections
• Step 5 Post the batch

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Using Accounting Applications for Recording
Invoices and Making Payments

• Record purchase invoice
• Risks and controls
• Recorded an event that never occurred
• Vendor invoice is not recorded, recorded late, or
  recorded twice
• Invoice data item is not accurate
• Invoice recording and execution risks

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Using Accounting Applications for Recording
Invoices and Making Payments

• Select invoices for payment
• Process
• Step 1 Print an open payables report
• Step 2 Select invoices for payment
• Step 3 Print a cash requirements report
• Execution risks

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Using Accounting Applications for Recording
Invoices and Making Payments

• Prepare checks
• Controlling risks
• Segregation of duties
• Required sequence of events
• Limitation of access to assets and information
• Sequence of prenumbered documents
• Positive pay system
• Efficiency

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Using Accounting Applications for Recording
Invoices and Making Payments

• Complete payment
• processsigning and
• mailing checks
• End of period activities
• Print accounts payable ledger
• Purge records

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K E Y T E R M S

• Accounts payable ledger
• Audit trail
• Bank reconciliation
• Cash payments journal
• Cash requirements report
• Journal
• Open payables report
• Purchase invoice
• Purchases journal