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CPA > CAVE CROC > Flashcards

CAVE CROC Flashcards

1
Q

How to test COMPLETENESS in Sales/receivables?

A

Q - Do sales/receivables reflect all recorded transactions in the period?

1) Trace total in AR to GL
2) Analytical procedures (Incl AR Turnover [net credit/Avg A/R])
3) Account for numerical sequence of sales related docs
4) Compare shipping documents w/ Sales invoices & J/E

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2
Q

How to test ACCURACY in Sales/receivables

A

Q - Have transactions & events been recorded appropriately?

1) Obtain Rep letter
2) Evaluate mgmt disclosures about reportable operating segments & related info
3) Compare GL w/ balances in FS
4) Examine results of confirmations

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3
Q

How to test VALUATION in Sales/receivables?

A

Q - Are A/R measured in accordance w/ Applicable financial reporting framework?

1) Age the A/R. Test adequacy of allowance for doubtful accounts
2) Trace cash receipts after bal sheet date for evidence of collectibility
3) Review delinquent credit ratings

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4
Q

How to test EXISTENCE in Sales/receivables?

A

Q - Are the accounts receivable valid assets?

1) Confirm A/R
2) Vouch recorded A/R to shipping documents

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5
Q

How to test CUTOFF in Sales/receivables?

A

Q - Have transactions been recorded in the proper period?

1) Sales Cutoff Test (FOB Shipping point counts as current year sales)
2) Cash Receipts Cutoff Test (Review daily remittance for proper recording)

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6
Q

How to test RIGHTS & OBLIGATIONS in Sales/receivables?

A

Q - Does the entity have the right to collect receivables?

1) Inquiries of Management
2) Track cash receipts to determine entity is collecting/depositing proceeds
3) Determine if sales have been made w/ a right of return and what expected and actual returns are after year end.

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7
Q

How to test OCCURRENCE in Sales/receivables?

A

Q - Did sales occur?

1) Vouch a sample of recorded sales to customer orders and shipping documents
2) A/R Confirmations

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8
Q

How to test CLASSIFICATION & UNDERSTANDABILITY in Sales/Receivables?

A

Q - Are sales and receivables appropriately described & disclosures fairly & clearly expressed?

1) Inspect income stmt sales are reported as revenue - returns and allowances
2) Inspect balance sheet ar presented as current asset - allowance for doubtful accts

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9
Q

How to test COMPLETENESS in Cash?

A

Q - Does the balance at the end of the period reflect all cash transactions?

1) Trace daily remittance list to valid deposit ticket
2) Trace last check written for period to acct records
3) Determine all outstanding checks listed on bank rec
4) Analytical procedures not effective, may use budget to compare w/ ye balance

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10
Q

How to test ACCURACY in Cash?

A

Q - Has cash been recorded accurately?

1) Compare daily remittance lists w/ deposits, journal entries & ledger postings
2) Compare GL balances w/ balances of financial statements

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11
Q

How to test VALUATION & ALLOCATION in Cash?

A

Q - Is cash valued in accordance w/ Applicable reporting framework?
1) Low inherent risk relative to assertion, additional testing needed for foreign currency

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12
Q

How to test EXISTENCE in Cash?

A

Q - Does cash exist? High inherent risk

1) Count cash on hand
2) Bank confirmation
3) Bank reconciliation
4) Cutoff bank statement to account for deposits in transit and outstanding checks
5) Consider the number of checks returned as means of improving current ratio (client writes checks to pay for current liabilities and mails next period)
6) Schedule of interbank transfers
7) Proof of cash

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13
Q

How to test CUTOFF in Cash?

A

Q - Have transactions been recorded in the proper period?

1) Inspect & trace daily remittance lists for several days after period year end
2) Identify & trace last check written for the year to records

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14
Q

How to test RIGHTS & OBLIGATIONS in Cash?

A

Q - Does the entity have ownership right to cash? Low risk

1) Confirmations relation to existence apply
2) Inquiries of management appropriate

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15
Q

How to test OCCURRENCE in Cash?

A

Q - Did cash transactions occur?

1) Vouch cash receipts to A/R & Customer orders
2) Vouch cash disbursements to approved vouchers

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16
Q

How to test CLASSIFICATION & UNDERSTANDABILITY in Cash?

A

Q - Is cash appropriately describes and are disclosures fairly & clearly expressed?

1) Inquire of mgmt about disclosure
2) Determine restricted cash (sinking funds/compensating balances) recorded as non-current asset on balance sheet
3) Assess statement of cash flows
4) Evaluate FS disclosure notes

17
Q

How to test COMPLETENESS in A/P & Purchases?

A

Q - Do balances contain all transactions for the period?

1) Reconcile AP w/ GL
2) Analytical procedures incl AP turnover
3) Trace subsequent payments to recorded payables. Checks that cannot be matched indicate unrecorded liabilities
4) Search for unvouchered payables (in suspense file for unmatched documents, results in unrecorded liabilities)

18
Q

How to test for ACCURACY in A/P & Purchases?

A

Q - Have the amounts been recorded appropriately?

1) Mgmt rep letter w/ assertions related to A/P & Purchases
2) Compare GL balance to balance on FS

19
Q

How to test for VALUATION & ALLOCATION in A/P & Purchases?

A

Q - Are A/P measured in accordance w/ applicable reporting framework? (Amp necessary to satisfy obligation)

1) Confirmation (not generally accepted but is evidence)
2) Should be satisfied w/ recorded payables using evidence from client
3) Interrelated to EXISTENCE

20
Q

How to test EXISTENCE in A/P & Purchases?

A

Q - Do the recorded amounts represent valid liabilities?

1) Confirmation (not generally accepted but is evidence)
2) Should be satisfied w/ recorded payables using evidence from client
3) Interrelated to VALUATION & ALLOCATION

21
Q

How to test CUTOFF in A/P & Purchases?

A

Q - Have transactions been recorded in proper period?

1) FOB Shipping - Current Year
2) FOB Destination - Next Year
3) Cash disbursements cutoff test

22
Q

How to test RIGHTS & OBLIGATIONS in A/P & Purchases?

A

Q - Does balance in A/P reflect liability of the entity? Low risk
1) Inquiries incl mgmt rep letter

23
Q

How to test OCCURRENCE in A/P & Purchases?

A

Q - Did purchases occur?

1) Vouch payables to documentation

24
Q

How to test CLASSIFICATION & UNDERSTANDABILITY in A/P & Purchases?

A

Q - Are payables and purchases appropriately described? Are disclosures fairly & clearly expressed?

1) Inspect financial statements (Payables are current liab, purchases part of COGS in income stmt)
2) Evaluate note disclosures

25
Q

How to test for COMPLETENESS in PPE?

A

Q - Are all transactions affecting PPE for the period reflected in the balance?

CPA (6 decks)

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