Lesson: Auditing the Expenditure Cycle

In this lesson, the importance of segregation of duties in the expenditure cycle is discussed and the various aspects an auditor can examine to verify this. Examples include ensuring purchase orders are issued by the purchasing department, the accounts payable department comparing information on each vendor's invoice with the receiving report, examining a sample of paid vouchers to determine if each voucher is stamped paid by the check signer, and matching purchase orders, receiving reports, and vendor invoices to detect vouchers that were prepared for the payment of goods that were not received. The lesson also covers examples of properly designed internal controls related to the expenditure cycle and explains how these controls can help prevent overcharging, overpayment, and duplicate payments. Additionally, the concept of a voucher packet is introduced, which comprises an invoice, a check, and a receipt. Lastly, the lesson briefly touches upon the assertions of existence and completeness in the context of the expenditure cycle.