Over the past year, it has been determined that there may be some control issues in each of the major transaction cycles. The following is a chart of each cycle with the areas of concern identified.
| Transaction Cycles | Areas of Concern |
| The procurement and payment cycle | There were 4,000 purchase orders that totaled $55 M for raw material. There is concern that not all purchases were completed using formal purchase orders, receipts did not match payment authorizations, and purchase orders were missing. |
| The capital acquisition and repayment cycle | Two capital projects totaling $2.5 M may have been overspent by $600,000 and may not reflect the reported capital spending. |
| The sales and cash receipt cycle | There were 15,000 invoices totaling $122 M in sales. Unauthorized discounts applied to invoices, credit terms applied to invoices may be incorrect, and unaccounted for invoice sequence numbering may be present. |
| The accounting for inventory | There were 6,000 stock keeping units (SKUs) that totaled $22 M. Physical inventories reported inventory losses of $300,000. |
Choose one of the specific transaction cycles and complete the following:
- Determine the appropriate methodology for designing tests of controls and substantive tests of transactions.
- I am need help answering the The procurement and payment cycle
Submit a 1-page chart with the following column headings:
| Transaction-Related Audit Objective | Key Internal Control | Common Test of Control | Common Substantive Test of Transactions |