That capital expenditure is appropriately classified in the accounting records Flashcards
What is risk?
The revenue expenditure is recorded as capital expenditure or vice versa
What is control objectives
Ensure that capital expenditure is appropriately classified in the accounting records
What is controls (order forms purchase inventory)_
Separate auduit forms should be used for the purchase of inventory items
What is controls (capital items authorised)
For capital items, the order should be authorised by one or two managers/directors depending on the value of items ordered.
Ordered then coded to appropriate non-current assets
What is controls (revenue and capital expenditure)
Review revenue and capital expenditure nominal ledger accounts for evidence of large/unusual items which may have been incorrectly recorded
What is tests of controls (sample orders)
Inspect a sample of orders for capital items
What is tests of controls (authorised signature)
Vouch that appropriate level of authorisation has been made and evidenced by a signature. Verify that account code relates to item ordered
What is tests of controls (management nominal ledger)
Discuss with management the outcome of the nominal ledger reviews
What is tests of controls (journals correct)
Inspect any journals made to correct errors to ensure that they have been authorised
