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What is a transaction cycle?
A group of homogeneous transactions

Homogeneous means - the same kind
A bulk of a company's economic activities can be grouped into a few categories called what?
Transaction cycles
Within a given category of transactions, what is true about control risk?
It is constant
What is meant by control risk being constant within a group of homogeneous transactions?
That all transactions within that category are Processed subject to the same configuration of internal control policies and procedures.
What are the 6 major transaction cycles?
A. Revenue/receipts

B.Expenditures/disbursements
C. Payroll

D. Inventory, especially manufactured inventory (since purchased inventory would be similar to expenditures/disbursements as presented here)

E. Fixed assets

F. Investing/financing
What is the acronym to use as a tool to analyze the audit considerations of internal control policies and procedures in each transaction cycle?
SCARE

Internal controls in each transaction cycle should SCARE!
What does the acronym SCARE mean?
(1) Segregation of duties,

(2) Comparisons,

(3) Access,

(4) Records, and

(5) Execution of transactions.
How does the SAS concerning specific transactions describe control activities?
In terms of 4 specific considerations:

(1) authorization;
(2) segregation of duties;
(3) safeguarding assets; and (4) asset accountability.
What does segregation of duties mean?
Separating "incompatible functions" to the extent possible, subject to cost-benefit considerations.
Give an example of a Segregation of Duties.
The same employee should not normally:

Authorize (execute),
Have access, and
Perform accounting activities in the ordinary course of duties.
What certain Comparisons should be made?
1. Comparing actual assets on hand to what the accounting records indicate

2. Comparing related accounting documents on a timely basis for consistency
By making certain comparisons, what is established?
Proper asset accountability!
Give an example of comparing related accounting documents on a timely basis for consistency.
Before paying a vendor's invoice, someone should verify that the goods reflected on that invoice agree with what was received per the receiving report, which agrees with the entity's purchase order
Access to assets and important accounting documents should be limited to whom?
Authorized personnel
The Access concept compares to the what two SAS control activities?
1. Safeguarding assets
2. Asset accountability
Having adequate records and documentation supports what two control activities?
1. Recordkeeping
2. Asset accountability
In specific transaction cycles, how what is the concept of Excecution?
Transactions should be recorded as management authorized
Authorization is the same concept as what concept under SCARE?
Excecution