{"id":616,"date":"2021-06-25T13:58:53","date_gmt":"2021-06-25T13:58:53","guid":{"rendered":"https:\/\/alminawi.com\/?p=616"},"modified":"2025-09-27T12:59:34","modified_gmt":"2025-09-27T12:59:34","slug":"internal-audit-methodologies-episode-04-matrix-of-assertions-internal-controls-example-1-purchasing","status":"publish","type":"post","link":"https:\/\/e.americanpro.org\/?p=616","title":{"rendered":"Internal Audit Methodologies: Episode 04, Matrix of Assertions & Internal Controls, Example: Purchasing"},"content":{"rendered":"

Auditing the purchasing process requires internal auditors to understand and test key management assertions<\/strong>. These assertions relate to the validity, completeness, accuracy, timing, and classification of transactions. Using a matrix approach<\/strong>, auditors can link assertions to potential misstatements, related internal controls, and appropriate audit procedures. This structured method enhances both risk assessment and test design.<\/p>\n

Purchasing Process Phases:<\/strong><\/h3>\n
    \n
  • \n

    Identify Needs<\/strong> \u2013 Recognize and justify procurement requirements.<\/p>\n<\/li>\n

  • \n

    Request<\/strong> \u2013 Create purchase requisitions and obtain approval.<\/p>\n<\/li>\n

  • \n

    Source<\/strong> \u2013 Select vendors and negotiate terms.<\/p>\n<\/li>\n

  • \n

    Order<\/strong> \u2013 Issue purchase orders.<\/p>\n<\/li>\n

  • \n

    Receive<\/strong> \u2013 Accept and inspect goods or services.<\/p>\n<\/li>\n

  • \n

    Pay<\/strong> \u2013 Match invoice, PO, and receiving report before payment.<\/p>\n<\/li>\n

  • \n

    Review<\/strong> \u2013 Assess supplier performance and compliance.<\/p>\n<\/li>\n<\/ul>\n

    Assertions and Internal Controls Matrix:<\/strong><\/h3>\n
    \n
    \n\n\n\n\n\n\n\n\n\n\n
    Assertion<\/strong><\/th>\nPotential Misstatement<\/strong><\/th>\nExample of Internal Control<\/strong><\/th>\nRelevant Questions \/ Tests<\/strong><\/th>\n<\/tr>\n<\/thead>\n
    Occurrence<\/td>\nFake or duplicate purchases<\/td>\nThree-way match (PO, invoice, receiving report)<\/td>\nAre all purchases supported by authorized documentation?<\/td>\n<\/tr>\n
    Completeness<\/td>\nMissing purchase transactions<\/td>\nSystem-enforced requisition and PO tracking<\/td>\nAre all purchase requests and POs sequential and accounted for?<\/td>\n<\/tr>\n
    Authorization<\/td>\nPurchases made without approval<\/td>\nHierarchical approval workflow for requisitions<\/td>\nWere all purchases approved according to policy limits?<\/td>\n<\/tr>\n
    Accuracy<\/td>\nIncorrect quantity or pricing on invoice<\/td>\nAutomated matching of PO and invoice in ERP system<\/td>\nDo invoice values match POs and receiving reports?<\/td>\n<\/tr>\n
    Cutoff<\/td>\nPurchases recorded in wrong accounting period<\/td>\nTimely entry of receiving and invoicing dates<\/td>\nAre receipts and invoices recorded in the correct period?<\/td>\n<\/tr>\n
    Classification<\/td>\nMisclassified purchases in incorrect GL accounts<\/td>\nPre-defined account codes and validation controls<\/td>\nAre purchases recorded in the correct accounts\/categories?<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n
    \n
    <\/div>\n<\/div>\n<\/div>\n<\/div>\n

    Practical Example:<\/strong><\/h3>\n

    During an audit of a public university’s purchasing function, the auditor found that lab equipment was recorded in office supply accounts. This violated the classification<\/strong> assertion. Though purchase requests were approved, the chart of accounts was not well-enforced. The auditor recommended mandatory selection from a validated account list within the purchasing system and follow-up training for requisitioners.<\/p>\n

    Using an assertion-control matrix like this helps auditors design relevant tests and ensures that all aspects of a process\u2014like purchasing\u2014are evaluated for integrity, compliance, and risk.<\/p>\n","protected":false},"excerpt":{"rendered":"

    Auditing the purchasing process requires internal auditors to understand and test key management assertions. These assertions relate to the validity, completeness, accuracy, timing, and classification of transactions. Using a matrix approach, auditors can link assertions to potential misstatements, related internal controls, and appropriate audit procedures. This structured method enhances both risk assessment and test design. […]<\/p>\n","protected":false},"author":2,"featured_media":223,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[17],"tags":[],"class_list":["post-616","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-internal-audit"],"jetpack_sharing_enabled":true,"jetpack_featured_media_url":"https:\/\/e.americanpro.org\/wp-content\/uploads\/2025\/05\/6-e1749906697815.gif","_links":{"self":[{"href":"https:\/\/e.americanpro.org\/index.php?rest_route=\/wp\/v2\/posts\/616","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/e.americanpro.org\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/e.americanpro.org\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/e.americanpro.org\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/e.americanpro.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=616"}],"version-history":[{"count":1,"href":"https:\/\/e.americanpro.org\/index.php?rest_route=\/wp\/v2\/posts\/616\/revisions"}],"predecessor-version":[{"id":1256,"href":"https:\/\/e.americanpro.org\/index.php?rest_route=\/wp\/v2\/posts\/616\/revisions\/1256"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/e.americanpro.org\/index.php?rest_route=\/wp\/v2\/media\/223"}],"wp:attachment":[{"href":"https:\/\/e.americanpro.org\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=616"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/e.americanpro.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=616"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/e.americanpro.org\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=616"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}