Transaction cycles - part 2

In this lesson

1. 0:00 Introduction to the purchases cycle
2. 0:50 Four key steps in purchasing
3. 1:36 Control objectives and risk management
4. 2:12 Practical controls for purchase orders
5. 3:12 Goods receipt and verification controls
6. 3:43 Invoice matching and payment controls
7. 5:00 Testing purchase cycle controls

About this lesson

The purchases cycle has four main steps—placing orders, receiving goods, receiving invoices, and making payment—and three core objectives: ensuring orders are valid and appropriately priced, goods arrive in correct condition and quantity, and payments go only to legitimate suppliers. You'll explore practical control examples across each stage of the cycle, from sequentially numbering purchase orders to matching invoices against purchase orders and goods received notes before payment. The video shows you how to think systematically about controls by identifying what could go wrong, what you want to prevent, and which specific control addresses that risk. This approach helps you link appropriate controls to business risks—a critical skill for exam questions. The video concludes with a worked example showing you how to test whether a control is operating effectively. By understanding the purchases cycle and its controls, you'll be better prepared for audit and assurance questions on the AA paper and gain practical insight into how real organisations protect themselves against purchasing errors and fraud.

Duration: 7m