Earthwear Hands-On Mini-Case: Tests of Controls On Accounts Payable

EarthWear Hands-on Mini-case
Tests of Controls on accounts payable
In this mini-case you will complete the tests of internal controls on accounts payable for the audit of
EarthWear Clothiers' 2019 financial statements. A sample size of 75 accounts payable voucher
packets has been selected for the test of internal controls on the accounts payable system. The
sample size is designed to provide high level of assurance (or confidence) that a control is operating
effectively so long as one or fewer control deviations is observed for each control activity tested. The
first 71 voucher packets have already been tested by other staff members and no errors have been
found. Your task is to review the remaining four voucher packets.
INSTRUCTIONS:
1 Review the list of control activities you are to test as indicated on Work Paper 6-1. The numbers to the
left of the control activities correspond with the control activity numbers on Work Paper 6-2. To better
understand the control activities you are to observe, please read the description of EarthWear's
purchasing system.
2 Complete the review of the internal control activities for the vouchers downloaded as PDF files.
Record your findings in the fields on Work Paper 6-2 indicated in yellow. The list of control activities
that correspond with the control activity numbers on the schedule can be found on Work Paper 6-1
and a description of the controls and flowchart of the purchasing process. For each control activity
indicate whether there is evidence that the control operated effectively by selecting "Effective" or that it
did not operate effectively by selecting "Deviation" from the drop down list in each of the cells in the
schedule.
Fields you are to complete on work papers are colored yellow. The color will disappear when the field is completed.
Return to Work Paper 6-1 and evaluate the test results by completing all the fields indicated in yellow.
3 Your test results on Work Paper 6-2 will automatically populate the schedule on Work Paper 6-1
where you will evaluate your findings. For any control activities that are not operating effectively, you
are asked to briefly describe the implications for the audit plan (i.e. additional substantive testing to
obtain evidence related to a particular assertion, etc.)
Fields you are to complete on work papers are colored yellow. The color will disappear when the field is completed.
When you have completed the work papers, enter your initials in the yellow box in the upper right-
4 hand corner of Work Paper 6-1 and 6-2 (box indicates "Initial Here").
Please print hard copies of work papers 6-1 and 6-2 to submit . The work papers are each formatted
5 to fit on one page.
Name:
Class:
EARTHWEAR CLOTHIERS 6-1
Controls Testing Evaluation Summary: Accounts Payable NGAI
December 31, 2019 3/25/2021
Test Results and Evaluation*

Number of
Description of Control Activities Deviations Maximum Number of
Assertion Observed Deviations Accept/Reject Describe Any Necessary Revisions to the Audit Plan
1 Document package includes all documents appropriate for the transaction. Occurrence 0 1 Accept
2 The purchase requisition is signed by a supervisor.** Authorization 2 1 Reject Additional substantive testing to obtain evidence related to the segregation of
duties in authorizing purchase requsitions.
3 The purchase order is signed by an authorized purchasing agent.*** Authorization 1 1 Accept
4 Quantities on vendor's invoice agree with related receiving report and Accuracy 0 1 Accept
purchase order, and invoice is mathematically correct.
5 All documents in voucher package have been stamped "paid". Occurrence 0 1 Accept
* Controls Testing for the accounts payable process typically involves more control activities. This mini-case provides good hands-on practice, but it is not intended to represent a full and complete illustration of accounts payable controls
activities that would be tested by auditors.
** Supervisors include: David Christensen, Daryl Mortensen, Mary Anne Kline, Fynn Amsel, Hanna Kirsch, Paul Pfeffer, Tsubasa Watanabe, and Akina Aoyama.
*** Authorized purchasing agents include: Alan Sheperd, Michelle Anders, Lukas Weber, Michael Kaufmann, Taisei Takahashi, and Leiko Katayama.
Name:
Class:
EARTHWEAR CLOTHIERS 6-2
Controls Testing Deviation Report: Accounts Payable NGAI
December 31, 2019 3/25/2021
Sample Testing Documentation
Control Activity
Document Number 1 2 3 4 5
164210 Effective Effective Effective Effective Effective
185423 Effective Deviation Deviation Effective Effective
190214 Effective Deviation Effective Effective Effective
195840 Effective Effective Effective Effective Effective
71 additional items Effective Effective Effective Effective Effective
Total Number of Exceptions 0 2 1 0 0

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Earthwear Hands-On Mini-Case: Tests of Controls On Accounts Payable

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EarthWear Hands-on Mini-case

Tests of Controls on accounts payable

Test Results and Evaluation*

Sample Testing Documentation

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