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Typical controls for each of the five activities of the acquisition and payment cycle:
Requisition (Request) for Goods and Services
The acquisition process for inventory begins with the companys production or sales plan.
Important controls in requisition include a production plan and authorization of a requisition
form that is sent to an approved vendor by a purchasing agent or that is sent through the
computer system according to preexisting contracts.
Cash Disbursement
The most important controls in these systems:
- Review of transactions
- The direction of vendor disputes to someone outside the process
D. Obtaining Substantive Evidence About Accounts, Disclosures, and Assertions in the Acquisitions and
Payment Cycle
1. Substantive Tests of Inventory and Cost of Goods Sold
Here, the auditor seeks reasonable assurance that inventory exists, that it is owned by the company,
and that the value of inventory is accurate. Substantive procedures should be performed for all
relevant assertions related to significant acquisition and payment cycle accounts and disclosures.