Using the narrative of the business processes or
transaction cycles that are relevant to an entity’s financial
reporting; identify the risk of material misstatement that may
occur in the transaction cycle and what control can be put in place
with respect to such risk identified.
Using The Narrative Of The Business Processes Or Transaction Cycles That Are Relevant To An Entity S Financial Reporting 1 (123.32 KiB) Viewed 28 times
Investing This cycle includes investments in the debt, and equity of their organizations, and purchases of property, plant, and equipment Debt and Equity Investments Investments may be categorized as marketable securities and long-term investments. Purchases are recorded proper amounts. Property, Plant and Equipment Property, plant and equipment acquisitions require board of directors' approval for purchases over a certain amount. Otherwise, the purchase is handled similarly to a merchandise purchase. As in the case of merchandise purchases, the item is recorded as an addition when some form of purchase authorization is present with a vendor's invoice and a receiving report. The company then selects an appropriate life and depreciation method (e.g., straight line, sum-of-the-years' digits, double-declining balance). Depreciation entries are made in the general journal with a debit to depreciation expense (manufacturing overhead or manufacturing equipment) and a credit to accumulated depreciation. The company should also have controls to determine that repair and maintenance expense have not been capitalized. Asset retirements are recorded by removing assets and accumulated depreciation from the general ledger—a gain (loss) may occur on the transaction. In the case of an exchange of assets, the entity has policies to determine that GAAP is properly followed in recording the transactions. What Can Go Wrong (Risk) Control Procedure
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