Expenditure Cycle Audit Simulator
An Interactive Guide to Purchases, Payables, and Audit Procedures
Module 1: The Purchase Process
A purchase begins with a need and ends with receiving goods. Strong controls require separating the duties of requisitioning, ordering, and receiving. Hover over each step to see its function.
1. Requisition
A department needs goods/services and sends a serially numbered, approved Purchase Requisition to the Purchasing department.
2. Purchasing
The Purchasing department vets vendors and issues a serially numbered Purchase Order (PO). Copies go to the vendor, requisitioner, receiving, and accounting.
3. Receiving
The Receiving department accepts delivery, inspects the goods, and counts them (using a "blind" PO without quantities). A Receiving Report is created.
Module 2: Accounts Payable & Payment
Once goods are received, the obligation must be recorded and paid. This requires separating the duties of recording the liability and disbursing cash.
1. A/P Department Records Payable
A/P matches the Vendor's Invoice with the PO and Receiving Report. This "voucher package" is the basis for recording the liability.
2. Treasurer Disburses Cash
The Treasurer receives the approved voucher package, signs and mails the check, and cancels the supporting documents to prevent duplicate payment.
Module 3: Audit Simulation - Search for Unrecorded Liabilities
Key Audit Assertions for Payables
Completeness
This is the primary risk. Is management trying to understate liabilities by not recording them?
Valuation & Accuracy
Are the recorded payables for the correct amount?
Existence
Do the recorded liabilities represent valid obligations of the company?
Audit Test: Examining Subsequent Disbursements
To test for completeness, auditors examine cash payments made after the year-end (e.g., in January 2025) to see if they were for liabilities that existed at year-end (Dec 31, 2024). Click the button to perform the search.
| Check Date | Vendor | Description | Receiving Report Date |
|---|---|---|---|
| Jan 5, 2025 | Office Supplies Inc. | Q4 Office Supplies | Dec 18, 2024 |
| Jan 8, 2025 | Express Shipping | January Shipping Fees | Jan 3, 2025 |
| Jan 10, 2025 | Consulting Group | December Consulting Services | Dec 22, 2024 |
| Jan 12, 2025 | Utility Power Co. | December Utilities | Dec 28, 2024 |
| Jan 15, 2025 | Raw Materials LLC | Component Parts | Jan 10, 2025 |
