(A4)M1-M6 Flashcards
as it pertains to the revenue cycle, a shipping document provides evidence of what?
that a sale occurred
if a client is recording fictitious sales, what document(s) is likely to be missing?
shipping documents. the client will record a fake sale and create a fake invoice as well, but it is unlikely that an accompanying shipping document will exist
when are confirmations of receivables not required?
when the balance is immaterial
which two documents are most likely to be produced by the revenue cycle application?
credit memo and sales invoice
what would an auditor’s review of a client’s sales cut-off detect?
unrecorded sales at YE and sales recorded in wrong period
procedures to test existence and occurrence
observation, inspection, examination, vouching
procedures to test valuation, allocation, accuracy
review of subsequent events, recalculations
procedures to test rights and obligations
inspection, examination, confirmation, review of subsequent events
clients may try to understate liabilities/expenses; therefore, auditors are especially concerned with which assertion?
completeness
clients may try to overstate assets/revenue; therefore, auditors are especially concerned with which assertion?
existence
as it pertains to the expenditure cycle, which 3 documents should always to be matched before a voucher is submitted for payment?
purchase order, receiving report, and vendor’s invoice
what functions are performed in the payables department?
match documents, update AP records, approve vouchers
which document provides authority to receive goods?
authorized purchase order
which department signs checks, mails check/remittance advice, and cancels voucher packages?
treasury
which department is responsible for approving the requisition to initiate a purchase transaction?
requisitioning department
a contingent liability can be identified by a ___ ___ confirmation
standard bank
what is kitting and how can it be identified?
when a check is drawn from one bank and deposited in another bank and no record is made of the disbursement in the balance of the first bank. Low average balance compared to high level of deposits
when looking at a bank transfer schedule, what would indicate check kitting?
the receipt date per bank is before the disbursement date per books
which of the following has to be properly disclosed in the FS: consigned goods and/or pledged inventory?
pledged inventory
inquiring about consigned inventory would test which FS assertion?
completeness
examining consignment agreements tests which FS assertion?
rights and obligations
in testing LT investments, an auditor would use analytical procedures to ascertain the reasonableness of what?
completeness of recorded investment income
in auditing investments in securities and derivatives, the auditor must assess three elements, what are they?
reasonableness and appropriateness of assumptions, market variables, and valuation models
what is the auditor’s responsibility when it comes to predicting how future conditions will impact the client’s fair value reporting during the current year’s audit?
no responsibility
at what point does a check actually become an asset?
when it is signed
notes can be classified as ___ or ___; therefore, procedures to test proper classification are important
current, non current
the procedure “tour the client’s facilities, and then inspect the property ledger and the insurance and tax records” tests for what, and the verse of this procedure test for what?
unrecorded addition (completeness) unrecorded retirements of fixed assets
what is the primary responsibility of a stock registrar?
verify that stock is issued only with proper authorization
if an auditor is testing the “reasonableness” of an account balance, he/she is usually testing which FS assertion?
valuation, allocation, accuracy
is construction is progress considered an asset on the BS?
Yes!
what is the journal entry when an asset is retired at a loss?
Loss on disposal
Acc Dep
Asset (at historical cost)
what is a remittance advice?
its sent along with a check for payment of goods (buyer sends to seller). Includes the invoice number and amount paid.
what is a credit memo and why is it used?
a document sent to the buyer by the seller indicating that the amount owed under an earlier invoice is being reduced. Usually results from returned goods.
