AUD-Lesson 4_GRADUAL Flashcards
What are the ‘First 4’ Management Assertions?
Has to do with completeness of information
COCA
Completeness
Occurrence
Cutoff
Accuracy
What are the ‘Second 5’ Management Assertions?
Has to do with classification of information
CURVE
Classification*
Understandibility
Rights and Obligations*
Valuation and Allocation*
Existence
What are the management assertions for the the Classes of Transactions & Events?
Classes of Transactions & Events (CPA-CO)
Cutoff
Accuracy
Classification
Occurrence
What are the management assertions for Account Balances?
Acct Bal. @ Year-End (RACE)
Rights and Obligations
Allocation and Valuation
Completeness
Existence
What are the management assertions for the Presentation and Disclosures?
Presentation and Disclosures (RACU)
Right and Obligations and Occurrence
Accuracy and Valuation
Completeness
Understandability and Classification
What is involved in Analytical Procedures?
Changes are analyzed at the beginning and end of an audit. Analysis is based on dollar amount and percentage of change to assess reasonableness and to see if a mistake may have been made.
What are the five basic types of comparisons that may be performed as analytical procedures?
CRAFT
Client vs Industry Related Accounts Actual vs. Budget Financial vs Non-Financial This Year vs. Prior
What are ‘rest of balances’ that are mentioned in the audit opinion?
For accounts with many transactions that are small dollar amounts. The auditor looks at the ending balance.
What are test of transactions?
Has few transactions. The changes are audited.
What assertions are tested for inventory?
RACE
Rights and Obligations
Allocation and Valuation
Completeness
Existence
What is kiting?
Deliberate overstatement of cash, by show in a deposit in the first period and the withdrawal in the second.
Can be audited with the Bank cut-off statement OR
the Intercompany Bank Transfer Schedule
What is the management representation letter?
It is a mandatory letter that needs to be provided by management at the end of the audit, or it is considered a scope limitation and a disclaimer of opinion will be issued.
What is the formula for Audit Risk?
AR = IRCRDR
What is positive confirmation?
Customer asked to respond only if amount is incorrect. This is when there is a lower Control Risk.
What is negative confirmation?
Customer asked to verify correctness of amount. This is when there is a higher control risk.
