9/23 Class Flashcards
Exam
review online 50-60 questions look at the multiple choice problems from class, study essential terms and review questions at the end of the chapter
introduction to audit preparation
on it
cycles
receipts sales and collections payroll personell cycle inventory and warehousing cycle capital acquisition and repayment
managements responsibility
financial statements
internal controls
SOX - CEO & CFO Certification
Report of Management
auditors responsibilities
perform audit of f/s(GAAS or PCAOB) material misstatements reasonable assurance material weaknesses in internal control Fraud Misappropriation of assets illegal acts
cycles
sales & collection acquisition & payment payroll & presentation inventory & warehousing capital acquisition & repayment
acquisition & payment cycle
balance sheet cash current assets & liab fixed assets & accum depr Income statement sales, general & admin exp inc taxes gains on sales of assets
payroll & personnel cycle
balance sheet cash accrued payroll & related taxes inc stmt salaries & commissions payroll taxes
Inventory & warehousing cycles
balance sheet
inventories & related allowances
Income statement
COGS
Capital Acquisition & Repayment Cycle
Balance Sheet Cash NP Long term liab accrued interest dividends payable stockholders equity Inc stmt interest exp
selecting audit objectives
balance sheet(ending balances) test debit balances for overstatement test credit balances for understatement inc statement test debits for understatement test credits for overstatement
Sales & Collection Cycle
Balance Sheet Cash A/R Allowance for bad debts Inc stmt sales returns & allow bad debt exp
financial statement assertions
existence or occurrence
completeness
pg 156
existence or occurance
is it really there? Did it happen?
Direction FS - GL - Source Documents
completeness
did all items get recorded?
are all liabilities presented?
valuation - gross
is it really valued correctly?
Historical cost principle (GAAP)
valuation - net
is it really worth what they say it is? NRV, LCM Impaired? collectability allowance - accounting est bad debts inventory obsolescence
valuation accuracy
are quantities accurate?
are prices or costs accurate?
are extended values correct?
footing errors?
cutoff
are all items for the period end included?
are there out of period items included?
did the records cut off at 12:00 midnight exactly on Dec 31, 2010?
rights and obligations
does the company have the rights to the assets?
Does the company have an obligation for a liability not presented?
rights & obligations
is there an unrecorded liability ? commitment agreement/arrangement guarantee The company claims the rights to a whole warehouse of inventory.
presentation & disclosure
adequacy of disclosure
per GAAP
Classification of accounts
Audit Decisions
procedures to use
sample size
method of selection from population
timing of procedures
sufficient, appropriate evidential matter
sufficiency - quantity appropriate - quality believable independent reliable relevant inverse relationship
appropriateness affected by
relevance related to audit objective-direction reliability independent sources effective internal control direct evidence obtained individual qualifications objectivity timeliness
types of audit evidence
physical examination confirmation inspection analytic procedures inquiries of client reperformance/recalcualtion observation
types of evidence
direct physical examination observe inventory procedures examine assets Confirmation third party representatives confirmation attorney letters
information confirmed pg 201/181
know it
- inspection
vouching - gl to client docs existence tracing - source docs to f/s completeness within company - customer invoice outside company - vendor invoice electronic documents - paperless be careful - faxes, photo copies, drafts
- analytical procedures
data interrelationships
- inquiry and written client representations
helps get things started
- Re-performance/Recalculation
yes
- Observation
learn them
audit procedures/audit program
materiality nature of procedures timing of procedures extent of procedures cost benefit relationship most expensive?physical , confirmation least expensive?
analytical procedures
required in the planning and performing of the audit plausible relationships financial and non-financial data nature of analytical procedures develop expectation perform procedures expectation vs actual investigate assess explanation conclude or dig further
types of procedures
industry data prior period data client expectations auditor expectations non-financial data purpose?
timing
during planning - required
substantive testing
overall concluding review - required
never used to test internal controls
extent of analytical procedures
depends on effectiveness precision predictability technique reliability of data
evidence on accounting estimates
ex: allowances, contingencies review management rationale auditor estimate compare inquiry experts or independent parties corroborating evidence subsequent events conclude
evidence on related party transactions
related party - any affiliates officer directors principal owners/shareholders immediate families of above affiliates review significant transactions disclose consolidate?
working papers
assigning and coordinating supervising and review supporting GAAS Stand alone Subsequent audit value Ownership Access
current file
planning
overall audit program
internal control documentation of understanding
engagement letters, times budgets, correspondence
working trial balance - by lead schedules
client financial statements (cross referenced)
AJE’s, RJE’s, Passed AJE’s
Management representation letter
content of working papers
current file audit programs for each account procedures/plan documentation conclusions permanent file articles of incorporation bylaws contracts other agreements other year to year data
prep of working papers
headings PBC Date/Signature of preparer and reviewer cross ref work papers tickmarks and legend explanation of procedures conclusions
review of working papers
reviewers senior manager engagement partner concurring review(Impartial) Technical Reviewer Review Notes
