CH11 [Auditing Inventory, Goods and Services, and Accounts Payable: The Acquisition and Payment Cycle] Flashcards
A networked software system that links a company’s website to other vendors whose offerings and prices have been pre-approved by appropriate management.
Automated purchasing system
Periodic testing of the accuracy of the perpetual inventory record by counting all inventories on a cyclical basis
Cycle count
A _______ committee reviews the client’s financial statements and footnotes; a ______ committee is a sub-committee of the Board of Directors, and is charged with ensuring that the organization’s MD&A and footnotes to the financial statements comply with financial accounting standards.
Disclosure committee
A _________ is a fake employee who has never worked for the organization, or a former employee who was never terminated from the payroll system and is still being paid.
Ghost employee fraud
Items of tangible personal property that are held for sale in the ordinary course of business, that are in the process of production for such sale, or that are to be currently consumed in the production of goods or services to be available for sale.
Inventories
Reduction in inventory presumed to be due to physical loss or theft.
Inventory shrinkage
A general category of fraud that includes timesheet, ghost employee, and worker misclassification frauds.
Payroll fraud
A system of inventory recordkeeping in which no continuous record of changes in inventory (receipts and issues of inventory items) is kept. At the end of an accounting period, the ending inventory is determined by an actual physical count of every item, and its cost is computed using a suitable method.
Periodic inventory system
A system of inventory recordkeeping where book inventory is continuously in agreement with inventory on hand within specified time periods. In some cases, book inventory and stock on hand may be reconciled with each transaction; in other systems, these two numbers may be reconciled less often. This process is useful in keeping track of the actual availability of goods and determining what the correct time to reorder from suppliers might be.
Perpetual inventory system
A legally binding document between a supplier and a buyer for the purchase of goods or services.
Purchase order
A request for the purchase of goods or services by an authorized department or function within the organization; may be documented on paper or in a computer system.
Requisition
Cash disbursements made by the client after year-end.
Subsequent disbursements
The management and control of materials in the logistics process from the acquisition of raw materials to the delivery of finished products to the end user (customer).
Supply chain management
A control in which a purchase order, receiving information, and a vendor invoice are matched to determine whether the vendor’s invoice is correct and should be paid. This control can be automated or manual
Three-way match
Paying employees incorrectly for the hours they work. Employees accomplish this type of fraud by falsifying their timesheets, having another employee clock in for them when they are not actually at work, or having a payroll clerk increase the rate of pay.
Timesheet fraud
