A4 - Performing further procedures, forming conclusions, and communications

Question 1

Valuation, Allocation, & Accuracy

Answer 1

Compare to documents for confirmation

Question 2

Lapping

Answer 2

Concealing theft by failing to account for cash receipts

Question 3

Kiting

Answer 3

Check drawn on one bank is deposited in another bank without recording the disbursement from the first bank. Overstates cash on FS.

Question 4

Measuring Fair Value of Investments

Answer 4

Level 1: Observable quoted prices in active markets for identical assets/liabilities.

Level 2: Observable inputs other than quoted mkt prices for identical assets/liabilities.

Level 3: Unobservable inputs using estimates & valuation methods. Based on management’s judgments.

Question 5

Control Deficiencies

Answer 5

-Control Deficiency: design or operation of control does not prevent or detect misstatements timely.

-Significant Deficiency: internal control deficiency(ies) over financial reporting, less severe than a material weakness but important enough to communicate to those charged with governance.

-Material Weakness: internal control deficiency(ies) over financial reporting, reasonable possibility that material misstatement of FS will not be prevented or detected timely.

Question 6

Confirmations

Answer 6

-Positive: Requires response. Used for high risk of material misstatement, uncertainty of reliability, & large balances.

-Negative: Response only if third party disagrees. Used for low risk of material misstatement, likely receive a response if there is an issue, & large # of small balances.