Bradmark Comprehensive Case

Chapter 10 – Expenditure Cycle

1) From the case description and the associated flowcharts, assess Bradmark’s internal controls over its
expenditure cycle procedures.

From the case description and the flowcharts, Bradmark could still improve its internal control
on the expenditure cycle procedures.

The receiving system is not user friendly and any voided mistakes cause a gap in the receiving
report number; the point of the RR number as a control is rendered moot. The employees also have to
manually input the data. This could cause errors to occur and would be very time consuming. Also to
avoid these problems, the management should have a blind document upon receiving their orders so that
the clerk would not input it manually, thus, the clerk would only input the numbers of the receive items.

2) Using the case description, the flowchart, the file structure, and financial data below, specify an audit
objective (that can be achieved using ACL™) for each management assertion presented in the matrix
below. For each audit objective, briefly describe the ACL test procedure.

Selected Financial data: Inventory Balance at 12/31/2004 $ 1,108,194.94

Management Assertion Audit Objective Audit Procedures to be

Performed Using ACL

Completeness Determine that accounts EXTRACT FIELDS

payable represent all amounts PO_Num Product
owed by the organization for Quantity Rec_Date
purchases of goods & services RR_Num Ven_Num IF
as of the balance sheet date. NOT (PO_Num =
Voucher_Pay.PO_Num)
Ensure that the Financial TO "unrecorded.FIL"
Statements reflect all goods OPEN
and services received by the
organization, less return, for To determined what are
the period covered. the unrecorded liabilities.

Valuation or Allocation Assets, liabilities and equity We used the Duplicate to

balances are included in the determine whether there
financial statements at are records that are
appropriate amounts and any repeated.
resulting valuation or
allocation adjustments are We used the STRATIFY &
appropriately recorded. CLASSIFY to determined
the anomalies. It is useful
Verify that accounts payable to know whether all
are stated at correct amounts payables represents all
owed. amounts owed by
Bradmark for every goods
purchased.
 Management Assertion Audit Objective Audit Procedures to be
Performed Using ACL

Establish that purchases We used join tables to

Accuracy transactions are accurately combine the PO files and
computed and based on the Vouchers file. Here
correct prices and correct you can determine
quantities. whether their price is right
and if there are
Ensure that the account discrepancies in the
payables subsidiary ledger is amounts.
mathematically correct and
agrees with the general ledger Also we used the filter
accounts. from the join table to filter
records where PO
amounts and Vouchers
amount that are not equal.

To answer parts 3 and 4 requires that you install ACL™ Desktop Edition (full educational version) on
your computer. To do so follow the instructions on the CD that came with the textbook. The ACL
Project and ACL files used in the Bradmark case are located in the Bradmark Data Folder on the
website. Download these files to your computer and click on the Bradmark 04 ACL icon. ACL will
automatically open the case.

3) Perform the ACL tests outlined in step 2 above. The Project and ACL files for the Bradmark case
are located in the Bradmark Data Folder. Hand in a report describing the audit tests and your
conclusions about the results of the test. To document your findings include in your report ACL
printouts showing details of test results and the command log.

COMPLETENESS:
Unrecorded Liabilities:
VALUATION & ALLOCATION
STRATIFY

CLASSIFY
DUPLICATE:

ACCURACY
JOIN VOUCHER & PURCHASE ORDER
4) Using the matrix format below identify an operational (business) risk related to the expenditure
procedures. Briefly describe the audit objective and ACL procedures to answer this concern. Perform
the ACL test and prepare a report with your conclusions. Document your report with ACL printouts
showing details of test results and the command log.

Operational/Audit Risk (indicate Operational/Audit Audit Procedures to be

which) Objective Performed Using ACL
 The auditor can use
 Improper Segregation of Duties  Establish that ACL’s Stratify and
(Warehouse clerk James Walker who purchase transactions Classify features to
is responsible for asset custody are accurately identify various
should not be given responsibility for computed and based characteristics and
maintaining inventory records.)
on correct prices and anomalies associated

quantities. with accounts
 Incorrectly functioning purchase
 Verify that accounts payable procedures.
authorization controls causing
unnecessary and incorrect orders to payable are stated at
be placed with vendors. correct amounts
owed.