Certified Government Auditing Professional (CGAP) Practice Exam

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What document should an auditor examine to ensure that only authorized purchases are made?

  1. Invoice

  2. Purchase order

  3. Receiving report

  4. Relevant procedures manuals

The correct answer is: Purchase order

The purchase order is the key document an auditor should examine to verify that only authorized purchases are made. A purchase order represents a formal request to procure goods or services and typically must be approved by designated personnel within the organization. This approval process is crucial as it helps to ensure that purchases align with the organization’s budgetary constraints and procurement policies. When auditors review purchase orders, they can ascertain whether they have been properly authorized prior to the procurement process, thus mitigating the risk of unauthorized or improper transactions. The presence of appropriate signatures and compliance with internal controls at this stage is a strong indicator that the purchasing process adheres to established guidelines. In contrast, invoices serve more as requests for payment after goods or services have been delivered, and while they can indicate who placed the order, they do not provide insight into the authorization process itself. Receiving reports document the receipt of items but also do not address the authorization of the purchase. Procedures manuals outline the processes to be followed but do not serve as evidence of actual purchases or their authorization. Therefore, the purchase order stands out as the most critical document for validating that only authorized purchases are made.