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This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here! 12-56 (Audit Procedures and Objectives) The following audit procedures are found in audit programs addressing the acquisition and payment cycle.
Management often perceives internal auditors as fact checkers and not as a source of important new information; whereas internal auditors know that they can effectively contribute to an M&A project because of their deep knowledge of processes.
Internal auditing should seek to become involved as early as possible in the M&A process. To contribute effectively and add value at the strategy development stage , there are several best practices that auditors should follow, including: * Receiving communication about deals and nonrecurring events.
The internal audit report should contain the audit scope and objectives, main control weaknesses identified, documentation of the target company's internal control system, and a possible remediation plan for compliance with the bidder company's control environment .
POST-ACQUISITION AUDIT. The final stage of an M&A project is the post-acquisition audit. Important to the success of this stage is internal auditing's level of involvement during the previous stages.
And because of their level of expertise and knowledge of the control environment, auditors can help other functions such as finance, information systems, and human resources overcome possible obstacles during this stage, working as bridge builders among the various functions of the bidder and target firm.
Internal auditors can ease their fears by communicating the objectives of the new organization.
MERGERS AND ACQUISITIONS (M&A) ARE TRANSACTIONS OF GREAT SIGNIFICANCE, not only to the organizations involved, but also to their many stakeholders. The success or failure of such an undertaking can have enormous consequences for an organization's shareholders and lenders, employees, competitors, and community, as well as the economy.
When auditing cycles for different companies, the typical approach is to: 1 Understand the entity and its environment 2 For each cycle, identify internal controls that exist 3 Assess control risk and the risk of material misstatement 4 Evaluate the cost-benefit analysis of testing controls and following a combined audit approach vs. a purely substantive audit approach
The classification assertion is highly important in this scenario because there are many possible debits that can fulfill the journal entry. The second class of transactions in the acquisition and payment cycle is the cash disbursements class. The typical journal entry for this class is simply a debit to accounts payable and a credit to cash.
The purchase requisition is a document that describes the product needed and the quantity required. The document is then sent to the purchasing department that generates a purchase order. The purchase order lists the product to purchase, the quantity to order, and the price the company is willing to pay.
Typically, employees are only permitted to buy from an approved vendor’s list. Once the ordered goods have been received by the next department, the company issues a receiving report. The report should reconcile with the purchase order and is sent to the accounts payable team in the accounting department.
An auditor, for the purpose of accounting, is a person whose job it is to make sure that information reported on financial statements is true and accurate and that the financial statements are prepared according to GAAP principles.
Specifically, the auditor is looking for the debits and credits to each account as transactions are entered during the accounting period.
His opinion makes or breaks the reliability of financial statement information. You see, GAAP protocol on financial reporting requires that an auditor's opinion be a part of notes to the financial statements. Notes to the financial statements are footnotes that appear at the bottom of the reports that give financial statement users added details about items that appear on the statements.
Does it keep things like receipts and invoices at least for the duration of the accounting period? The third step involves examining each transaction that occurred in the accounting period. Next, the auditor examines the internal control system that's in place in the company. Fifth, the auditor looks at the company's cash account and examines any activity that has occurred here.
The GAAP, or generally accepted accounting principles, are the guidelines for financial reporting that accounting professionals must follow. Auditors are charged with the task of forming opinions about the validity of information that is found on the financial statements.
Auditors look for timeliness in getting documents, such as receipts, invoices, bank statements, and payment records, from each individual department to the accounting department . The time line of this activity can and will affect when revenue and expenses are recognized.
The general assumption for the purpose of financial statement auditing is that the auditor will form his own independent opinion based solely on the information collected in the audit. If the auditor's opinion doesn't appear on the financial statements, then they don't meet the set standards. Audited financial statements that contain the concise, written opinion of an independent auditor are deemed to be true, valid and reliable.
When auditing cycles for different companies, the typical approach is to: 1 Understand the entity and its environment 2 For each cycle, identify internal controls that exist 3 Assess control risk and the risk of material misstatement 4 Evaluate the cost-benefit analysis of testing controls and following a combined audit approach vs. a purely substantive audit approach
The classification assertion is highly important in this scenario because there are many possible debits that can fulfill the journal entry. The second class of transactions in the acquisition and payment cycle is the cash disbursements class. The typical journal entry for this class is simply a debit to accounts payable and a credit to cash.
The purchase requisition is a document that describes the product needed and the quantity required. The document is then sent to the purchasing department that generates a purchase order. The purchase order lists the product to purchase, the quantity to order, and the price the company is willing to pay.
Typically, employees are only permitted to buy from an approved vendor’s list. Once the ordered goods have been received by the next department, the company issues a receiving report. The report should reconcile with the purchase order and is sent to the accounts payable team in the accounting department.