Audit Documentation Flashcards

1
Q

Audit Documentation should be retained

A

AU-C 230 requires that they be maintained a minimum of five years.

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2
Q

Tracing

A
  • Tests Completeness
  • Starts with source document and traces forward to journal entry
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3
Q

Vouching

A

Tests Existence

Starts with Journal Entry and searches for a voucher or source document to support the entry

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4
Q

Tracing vs. Vouching

A

T before V

C before E

Tracing = Completness

Vouching = Existence

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5
Q

Segregation of Duties

A
  • Non Compatible Duties
  • Authorization of asset disbursement
  • Recording of Assets
  • Custody of Assets
    *
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6
Q

Observation and Inquiry

A

Use Observation and Inquiry if supporting evidence doesnt exist

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7
Q

Segregation of Duties

A
  • 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)
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8
Q

Segregation of Duties

A
  • 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
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9
Q

Treasury Department

A
  • Treasury Department (custodians) should NOT have record keeping duties
  • They control assets and should not be able to adjust any recording of those assets
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10
Q

Work of Third Parties

A
  • Are they Competent
  • Are they Objective
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11
Q

Internal Auditors

A

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
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12
Q

Internal Auditors

A
  • 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

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13
Q

Subsequent Events

A

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.
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14
Q

Subsequent Events

A

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.
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15
Q

Flowchart

A
  • 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).
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16
Q

Mgmt F/S Assertions

A

When management prepares financial statements in conformity with GAAP assertions are made about

  • Account Balances
  • Classes of Transactions
  • Disclosures