Assertion per book and which audit procedure(s) go with which Assertions Flashcards
Which audit procedures relate specifically to the Completeness assertion?
Tracing
Analytical Procedures
Observations processes/procedures
Which audit procedures relate specifically to the Valuation/allocation/accuracy assertion?
Inspection of docs/supporting trans
Footing and crossfooting of schedules
Independent Recalculation (aging AR to verify AFDA or estimates)
Reconciliation of supp. schedules to GL items
Which audit procedures relate specifically to the Rights and Obligations assertion?
Inspection of documentation supporting trans, inspection of contracts, etc
Which audit procedures relate specifically to the Understandability and classification assertion?
Inspection of documentation supp. trans
Review of all disc. for GAAP compliance
Inquiry of mgt regarding disc. for the acct and related accounts
Which audit procedures relate specifically to the Existence AND Occurrence assertions?
Confirmation of accts w/thrid parties
Observation, inspection, and examination of assets, processes, and procedures
Vouching
About payroll transactions: The occurrence assertion as it relates to payroll transactions would correspond to an audit objective to determine that payroll transactions actually occurred (i.e., that all payroll checks were issued to valid employees for hours actually worked). Segregation of duties between personnel and payroll departments is an important control to ensure that only valid employees receive paychecks.
Inspecting evidence related to prenumbering of payroll checks would relate to the completeness assertion.
Verifying the preparation of the monthly payroll account bank reconciliation would provide significant evidence for the accuracy assertion for payroll transactions.
A debit to accumulated depreciation decreases the balance in that account. The retirement of plant assets necessitates the removal (decrease) of accumulated depreciation related to the retired asset by debiting accumulated depreciation.
Remember that correction of an estimate is given prospective, not retroactive, treatment. Therefore, there would not be any decrease in the accumulated depreciation taken in previous years, although future credits would be lower than previous credits had been
Formula for Gross profit margin =
(NET SALES - COGS) / (NET SALES)
If both the numerator and denominator are affected, the one the increases/decreases more is what affects the change.
if the numerator increases more than the denominator = ratio/% goes up. if the numerator decreases more than the denominator, the opposite is true
if the denominator increases more than the numerator, the ratio/% goes down
