7 Flashcards
completeness
did everything make it to the f/s
it happened, but did it make it to the f/s
For AR - trace sales invoice & shipping docs just before year end to customer account transactions. A sale in year one was recorded in year one.
For AP - examine invoices pd subsequent to year end & trace to sub ledger.
Client is not going to pay someone they don’t owe,
Accuracy, valuation, and allocation
Is it shown at the correct amount?
Inventory - examine invoices from suppliers
It will reflect what we paid our suppliers for our inventory
Rights and obligations
Appropriate ownership
Fixed assets - inspect title, or
Fixed Assets - vouch fixed asset acquisition to purchase invoices
This will show that we purchased the asset.
We would not vouch to a cash disbursement bc a loan may be used to purchase the asset and not use out own cash.
Existence
Does this exist
Cash - think bank stmt - agree cash balance per the bank rec to the yr end bank stmt
Pro-Forma financial info
shows the effects that an actual or potential transaction might have had on historical financial information had the transaction happened at an earlier date.
Compiling Pro Forma Info - Prerequisite
The underlying historical f/s must have been compiled, reviewed, or audited
Prospective
forward looking
prospective financial info
types
financial forecast
and
financial projection
financial forecast
defined
Prospective f/s that present, to the best of the responsible party’s knowledge and belief, an entity’s expected financial position, results of operations, and CF. A financial forecast is based on the responsible party’s assumptions reflecting conditions it expects to exist and the course of action it expects to take
financial forecast
expectations of the future
financial projection
defined
Prospective f/s that present to the best of the responsible party’s knowledge and belief, given one or more hypothetical assumptions, an entity’s expected financial position, results of operations, and CF. A financial projection is sometimes prepared to present one or more hypothetical coursed of action for evaluation, as in a response to a question that begins for instance, “What would happen if…?”
financial projection
hypothetical
Prospective financial info
types of engagements
Compile or prepare are permitted
Reviews are NOT permitted
Financial projections -
Accountant should not associate w/ a projection that
- fails to identify the hypothetical assumptions
2. omits a description of the limitations of the usefulness of the projection
Prospective fin info
Report statements
- The forecast or projected results may not be achieved
2. The acct assumes no responsibility to update the report for matters occurring after the date of the report
