Audit Documentation Flashcards
Audit Documentation should be retained
AU-C 230 requires that they be maintained a minimum of five years.
Tracing
- Tests Completeness
- Starts with source document and traces forward to journal entry
Vouching
Tests Existence
Starts with Journal Entry and searches for a voucher or source document to support the entry
Tracing vs. Vouching
T before V
C before E
Tracing = Completness
Vouching = Existence
Segregation of Duties
- Non Compatible Duties
- Authorization of asset disbursement
- Recording of Assets
- Custody of Assets
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Observation and Inquiry
Use Observation and Inquiry if supporting evidence doesnt exist
Segregation of Duties
- Accounting should be segregated from Production
- Employees who prepare vouchers/invoices should not have authority to Sign Checks
- Authority to make a payment should not lie in hands of those creating invoices /vouchers
- This control assists company in fraud prevention (ie set up fake companies and pay themselves)
Segregation of Duties
- Employees who have custody of assets should not also RECORD those assets
- ie Someone in charge of petty cash s/not have record keeping duties
Treasury Department
- Treasury Department (custodians) should NOT have record keeping duties
- They control assets and should not be able to adjust any recording of those assets
Work of Third Parties
- Are they Competent
- Are they Objective
Internal Auditors
Auditor needs to understand the role of Internal Auditors within the organization because their work affects the audit plan
On the CPA Exam, watch who they report to
- Audit Committee?
- More objective
- More reliance
- Manager
- Less Objective
- Less reliance
Internal Auditors
- Responsibility for judgments about materiality or appropriateness of entries or estimates cannot be shared with third parties like Internal Auditors
- Internal Auditors should be asked to do some of the legwork like preparing schedules or running reports
They should not be asked to make any decisions or judgments
Subsequent Events
Auditors should make inquiries of officers and other executives having responsibility for financial and accounting matters, including inquiries on
- matters including contingent liabilities existing at the date of the balance sheet,
- whether there was any significant change in capital stock, long-term debt, or working capital
- current status of items in the financial statements
- any unusual adjustments.
Subsequent Events
Auditor should make inquiries of officers and other executives having responsibility for financial and accounting matters, including inquiries on
- (1) matters including contingent liabilities existing at the date of the balance sheet
- (2) whether there was any significant change in capital stock, long-term debt, or working capital
- (3) current status of items in the financial statements
- (4) any unusual adjustments.
Flowchart
- Symbolic representation of a system or series of sequential processes.
- The flowchart prepared during the consideration of internal control is a symbolic representation of a system of sequential processes.
- It can be used in lieu of the internal control questionnaire which has the same purpose (i.e., to prepare a record of prescribed internal control).