 and welcome to the session. This is Professor Fahad in which you would look at CPA exam questions covering the purchasing cycle. The purchasing cycle is covered in the auditing section of the CPA exam as well as an auditing graduate or undergraduate course. I do cover the auditing cycle as well as all other accounting cycle in my auditing course. So if you are looking to learn more about this topic, purchasing, revenue, inventory, property, plant and equipment, equity, expense cycle, they all covered in my auditing course. So in this session, I'm going to focus on one section. But if you need more review, please check out my auditing course on my website where you will have detailed explanation about this topic. As always, I would like to remind you to connect with me on LinkedIn if you haven't done so. YouTube is where you would need to subscribe. I have 1700 plus accounting, auditing, tax, finance, as well as Excel tutorial. If you like my lectures, please like them, share them. If they benefit you, it means they might benefit other people. Subscribe to my YouTube, connect with me on Instagram. On my website, farhadlectures.com, this is where I have my courses. And my auditing course will cover this topic way in detail as well as other courses as well. I do also have a CPA auditing section on my website. So in case you need to supplement your education or your preparation for your CPA exam, if you want to add 10 to 15 points or what I ask you to do is check out my website. So let's take a look at the first question. And the first question asks, how many different documents are generally involved in the purchasing cycle? So simply put, what I'm trying to test here is, do you know what the purchasing cycle is? How many documents are involved? So what is the purchasing cycle? The purchasing cycle is from the time we purchase and until the time we receive the material. So what are the documents that are involved in this process? Let's assume you work in a particular department at your company and you want to purchase, let's assume a laptop or an iPad. What do you do first? First you have to fill out a purchase requisition, purchase requisition report. And what's this purchase requisition report? It's filled out by you and you're going to need your manager's approval or the head of the department approval that you need that iPad. Let's assume you are buying an iPad. That's what you're buying. So that's one document, purchase requisition. What's going to happen is this. Once it's approved, this document should go to the purchasing department. So the purchasing department will fill out a purchase order. So what's going to happen? The purchasing department would look at the request and they would say, yes, main source is requesting an iPad, main source supervisor approve the iPad. It must be a legitimate purchase. Now we are ready to make the purchase. Therefore they will send the order to Apple because we're going to buy an iPad from Apple. Now also what we do, we're going to prepare a report once we receive the iPad. So who's going to prepare this report? The receiving department. So the receiving department would prepare a receiving report. So once we receive the iPad, they would say, okay, here's what we received. We received an iPad. They'll have the description, the item number, so on and so forth and the details. So notice one, two, three. Are we done yet? No, we still have one more report, which is four. And that fourth report is what Apple invoices. Apple will send us an invoice, a purchase invoice, asking us to pay, to pay for the bill. So those are the four documents. We need a purchase requisition, a purchase order. When we receive it, a receiving report, then the purchase invoice. Once we have those documents in order, in order means we have all of them. And in this particular order, the reason I said in order, because the next question they're going to ask you about the order of these document, then you have a valid, legitimate purchase, and we can put them all together in a voucher system and submit them for payments, submit them for payments. So let's take a look at these, this question. Put these documents in the order in which they appear in the purchasing cycle. Well, we kind of did this question already. So but this is how you would approach this question. Well, if you know that the purchase requisition is the first document, if you already know this, immediately you could eliminate C and D. So if you know the purchase requisition is the first document, then you're ready down to 50-50. Then after the purchase requisition comes the purchase order. Once it's approved, now you can ask them to prepare the order. The purchasing department will, will prepare the purchase order. So this is the purchasing department, the purchasing department. Also you have to know which department is doing what. This is the purchasing department, receiving department. You have a receiving room or a receiving department, prepare this report, receiving room, room or department. The purchase invoice usually goes to the accounts payable or to the accounts payable to update the record. Then the purchase requisition is the person that's preparing the report, whoever that person is. So once you know the purchase order comes next, A is the answer. Then comes the, then they, then you receive it, then they invoice you. Therefore the answer is A. The answer is A. Let's take a look at this question in a purchasing cycle that uses a voucher system, good internal control, dictate that which of the following department should be responsible for signing the check and mailing the check to the vendor. So who should sign and mail the check? Well look, should the accounts payable, the voucher payable, signs the check and the answer is definitely no. Why? Because payable is accounting. Accounting should not have access to cash. So once we eliminate B and D, we're down to A and C. So it's the cash disbursement. Now the cash disbursement usually it's the treasury person that signs the check. But the question becomes who mails the check? Do you sign the check and send it back to the voucher payable, to the accounts payable department and ask them to mail it? No, that's bad. Again accounting should not have access to cash. Therefore as soon as you sign it immediately, as soon as possible, you mail it out. Therefore the answer is C. And this is basically proper internal control. So the check should never go backward, go to the accounts payable department. The voucher payable or the accounts payable, they put all these documents together. They put all these documents together and they send them to the cash disbursement, to the cash disbursement, to pay the bill. And the cash disbursement, don't send it back to them. They sign the check and they send it out. Let's take a look at this question. To provide to provide assurance that each voucher is submitted and paid only once. In order with examine a sample of paid voucher, so they're already paid and determine whether each voucher is what. So we want to make sure that we only paid the voucher once. We only paid the bill once. Okay. One, supported by a vendor invoice and a purchase order with that. That's a good practice. We want to make sure that each payment is supported by a vendor invoice and a purchase order. But is that really for payment purposes? No, that's for authorization. That's if you want to make sure they were properly authorized, we examine this. So one is not an answer because it doesn't serve our purpose, the paid. So if one is out, C is out, A and C are out. We're only left with B and D. So you want to find out if two is correct, if two is correct, the answer is B. If two is incorrect, it doesn't serve what we want to do. Then the answer is D. The voucher is stamped paid by the check register. Yes, once we stamped it, once we write on it paid, something like this paid. And if it's right, you just initial paid MF. I paid it, Mansour far had paid it. That's who said it's paid. Once you stamped it paid, then that's it. Then hopefully, not hopefully, the purpose is if somebody else get their hands on that voucher, they're going to see it's paid. Therefore, we don't pay it twice. I would say two is a good answer. Okay. So we need to determine whether each voucher is stamped paid by the check signer. So once you sign, once you pay it, stamp it paid. So no room for mistake. Well, there is room for fraud. Somebody could, you know, write another check again, but that's not, that's not by mistake. That's fraud. That's different for a good internal control, stamp it paid. So this way, if somebody sends another check, it's easier to kind of determine whether it's fraud or by error. We will tell them, look, didn't you see it's stamped paid? Why did you pay it again? Okay. So that's part of it because they can claim. I did not know it was paid. Well, it was paid. Don't pay it again. Let's take a look at this question. An auditor vouchers a sample of entries and the voucher register to the support and documents. So here you're going backward. You're looking at your entries, at your journal entries, and you're going backward to find support and documents. Which assertions with this test with this most likely support. Okay. So what are we looking for here? So let's assume we said we paid someone, we made a payment. So if we make a payment at the end of the day, we debit accounts payable, we credit cash. So this is what we're doing. Let's assume we are looking at this voucher at this entry $200, $200. I'm sorry, I'm laughing because at some point I still remember when I was doing audit, I would do this and sometime I would select payments like and one time it was for toilet papers. So I wanted to make sure that indeed they purchased toilet papers. So what I do is you will take the entry then you go backward to see why did we make this payment? Do we have support and documents? I still laugh about it that it was a toilet paper. It's something that came to my mind now. It came to my mind now. So what are you doing when you do so when you're going backward? You're looking at the accounting record and going backward for support and document. You want to see if this transaction actually exists. If it exists, then that's fine. If it's exist, then keep it. If it doesn't exist, if it doesn't have support and document, then we have an issue. So existent or occurrence, one is definitely a candidate. So I'll take out B and take out D. Or what I have to find out if to serve this test, completeness. Is this a completeness test? And the answer is no. The opposite is completeness. Completeness is when you look at the documents and you go forward to make sure it went all the way to the journal entry. This is what completeness is. So you want to make sure the difference between existence, occurrence, and completeness in all these terms. So the answer is A. And how do you learn all of this? Well, you either learn it in college, good for you. If not, go to my auditing course on my website, farhatlectures.com, where I have plenty of explanation about these topics. This is what you need, my auditing and attestation. The good thing about my website is once you subscribe, you have access to everything, especially additional CPA resource material. Look, CPA is a lifetime investment. Take it seriously. Don't shortchange yourself. Study hard. Good luck. 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