Assertions and Audit Stuff Should know Flashcards
Assertions related to Presentation/Disclosures of F/S
(RACOU-N)
*RACOU-N’s are always presenting and disclosing my garbage at night!
- Rights/Obligations- all info P/D is related to e&T, other matters that pertain (it all took place)
- Accuracy/Valuation- Both fin/nonfin info is fairly presented, disclosed and in the right amts (we know all correct)
- Completeness-all infor that should be presented is disclosed (its all included)
- Occurrence- Disclosed E&T and other have occurred and pertain to the entity
- Understanding/Classification- fin info is properly presented, described and disclosures are clear.
Assertions related to Account Balances
(RACE)
*Entity w/ good B/S is running a good RACE!!!
Amounts reported as of date of F/S; presented on B/S
- Rights/Obligations- have rights to items reported as assets/liabilities
- Allocation/Valuation- All A,L,SE are reorted in right amts as of F/S date
- Completeness- All A,L,SE ahve been included in F/S
- Existence - A,L,SE reported on F/S exist as of F/S date (they’re real)
Assertions related to Events & Transactions
(CPA-Co)
*If all Rev; Exp are properly reported, the CPA Co will have no problem preparing your taxes
E and T during period of audit; presented in I/S
- Completeness: All E&T pertaining to entity have occurred
- Period Cutoff: All E&T have been reported in appropriate period
- Accuracy- All E&T reported in right amts
- Classification- All E&T in appropriate accts or categories
- Occurrence- The E and T did occur, it happened.
Analytical Procedures: Comparisons you can do
CRAFT
- Client vs industry- Look at data for plausible relationships to averages w/in industry
- Related Accts: Expectations
- Actual V. Budget: results should have plausible relations to budget
- Fin v. Nonfin- Nonfin measures assoc w/dollars/revenues ie fin
- This year vs prior year
COSO Framework: Control Environment factors
CHOPPER
- Commitment to Competence
- Human Resources Policies
- Org Structure- bigger co. operating all over has bigger problems.
- Participation- Those charged w/governance
- Philosophy of mgt & Operating Style
- Ethical Values/Integrity
- Responsibility assignment- How authority, responsibility and accountability is assigned determines controls needed
Internal Control Components
CRIME
-Control Activities- ensure mgt directives carried out such as: performance reviews, Info processing, physical controls, segregation of duties (CAR)
- Risk Assessment
- Info and Communication
- Monitoring
- control Environment
Steps in understanding the Internal control structure:
1) obtain understanding of CRIME using Risk Assessment procedures(analytical procedures, inquiries, inspection, observation)
2) Document the understanding
3) Assess RMM
4) Develop Audit Strategy
Rely: Perform Test of controls to see if CR is below max level
Not Rely: Assess CR at max Level
5) Reassess RMM
6) Document conclusions; develop audit program or revise for more audit procedures
Techniques used to document auditor’s understanding of IC structure
(FIND)
- Flowcharts
- IC Questionnaire
- Narrative or memo
- Decision Table/Tree
Auditor will seek reasonable assurance that IC are achieving objectives of a system of IC
(ACE)
- Accurate and reliable financial reporting
- Compliance with applicable laws/regs
- Efficient/Effective Operations
Successor inquiries of Predecessor
RID-C
-Reasons for change
-Integrity of mgt
-Disagreements during audit
-Communication w/mgt or those charged w/governance
May include a review of working papers: IC, Substantive Procedures, contingencies, subsequent events
Overall Objectives and Responsibilities of the Auditor
TIPICANOE
TIPPICANOE Responsibilities: -Training and Proficiency -Independence and due care -Profesional skepticism
Performing:
- Internal Controls
- Corroborative Sufficient Appropriate Evidence
Reporting:
- Accounting Principals in accordance w/AFRF
- No new principles (consistency/comparability)
- Omitted Disclosures (NONE)
- Express Opinion
Elements of Quality control of the Firm
HEAL-ME
- HR
- Ethical Requirements (Independence)
- Acceptance/Continuance of Client relationships and specific engagements
- Leadership Responsibilities for quality w/in firm
- Monitoring
- Engagement performance
Attestation Engagements: Must be independent
ERAS
- Examinations (Audits)
- Reviews
- Agreed Upon procedures, engagements or others that lead to findings
- Special Reports
Elements of Engagement Letter
FACSIMILE
- Fees
- Auditors Responsibility (GAAS)
- Confirmation of Engagement
- Scope and Objective
- Internal Control
- Mgts Responsiblity
- Irregularities-Fraud
- iLlegal acts: noncompliance w/laws and regs
- Errors
Steps in Planning the Audit
(BRAIN STOPS)
“auditor’s brain stops if they don’t plan out the audit carefully”
- Basic Discussions w/client
- Review of Audit Documentation
- Ask about recent developments
- Interim F/S (analytical procedures to identify items that differ from earlier years)
- Nonaudit Personnel- provide info about the client
- Staffing
- Timing
- Outside assistance- experts
- Pronouncements- change in acct principles/stds read or reviewed
- Scheduling w/client
