Audit Business Cycles and Management Control

Assignment: 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. (Already have been pre-selected)

Transaction Cycles/Areas of Concern

1.)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.

2.)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.

For the transaction cycles complete the following:

• Determine the appropriate methodology for designing tests of controls and substantive tests of transactions.

Submit a 1-page chart with the following column headings:

In preparation for the year-end audit at Bovar Company, you will create a presentation to management for its approval. Complete the
following:

• Present the methodology that he or she developed
  for his or her transaction cycle which should address the
  aforementioned control issues.
• How to address the identified control issues.
• Provide an outline regarding the methodology for the 2 major transaction cycles selected and complete the following:
  • Designing tests of controls
  • Designing substantive tests of transactions

All information should be compiled into one cohesive presentation. (Deliverable Length: 400–500 words, 8–10 slides (not including cover and references) with notes) Please include references.