Audit 8 Flashcards
what assertions:
each receivable is collected subsequent to the year end
existence and valuation
What assertion:
each invoice is supported by a customer purchase order
occurence
Auditor selects a sample of sales transactions and examines evidence of credit approval - what assertion
valuation or allocation
When you are disclaiming an opinion B/C disagreements that mgmt wont change - what do you include in your report
If you are disclaiming and you are aware of departures from GAAP - it should be appropriately disclosed in an other matter paragraph in the auditor’s report
When assessing the competence of Internal auditors the CPA would most likely obtain information about
The quality of the internal auditor’s working paper documentation
Increasing product warranty periods without increasing warranty reserves
and
Relaxing credit policies without changing accounts receivable collectibility assumptions
are actions that management might take to do what:
fraudulently overstate income
Which of these will would allow magma to overstate current ratio:
1- improperly classifying current debt as concurrent
2-Improperly recording expenses as debits to RE
3-Failing to record Interest Expense on Long -Term debt
1Yes - current ratio will be over stated
2-No - only equity and income statements accounts are affected and the current ratio is not
3 yes - not recording interest expense understand accrued interest payable - overstating current ratio
how does materiality increase or decrease affect
Audit Risk
DR
IR
AR - direct
DR-Direct
IR - Inverse
Why is the degree to which info tech is used in accounting function an important factor to determine the extent of the documentation of the auditor’s understanding of a client’s system of internal controls
The form and extend to the documentation is influenced by:
the nature, size, and complexity of the entity,
internal control of the entity (which includes control over the use of technology)
availibility of information from the entity,
and the audit methodology used in the audit
When you are doing an engagement with an attest client - why can’t ou prepare routine invoices for the client
- Source documents, including invoices, are designed to initiate action on behalf of either the client,a customer, or a supplier
- As a result preparing source documents involves accepting management responsibility and impair independence
If F/S omit most all of the disclosure, as long as the omissions were not meant to mislead users - what kind of report can you give and what would you change
A compilation report as long as you modify it to say that the disclosures were omitted
what is the primary purpose of TOB
To determine if the controls are operating effectively
When there are many PPE transactions during the year and you want to assess CR at a low level what TOC would you perform
TOC and limited tests of current year property and equipment transactions
Inspecting an entities report of renumbered shipping doc’s that have not been recorded in the sales journal test what assertion
Completeness
When engaged to examine and report on management written assertion about the effectiveness of I/C - what form of report is required
It must be in the form of a separate report that will accompany the accountant report
