Ch.19 Completing the Test in the Acquisition and Payment Cycle

Question 1

What is covered in Phase III ?

Answer 1

• Design TDB to satisfy BALANCE-related audit objectives
• TDB Focuses on End. Bal. of G/L for B/S & I/S
• Establishes $ Monetary correctness of accounts

Question 2

What are the 6 Balance Related objectives?

Answer 2

D - E - C - A - C- R - C

1) Detail tie-in
2) Existence
3) Completeness
4) Accuracy
5) Cutoff
6) Rights
7) Classification

Question 3

What is the 1) Balance related objective?

TDB?

Answer 3

1) Detail tie-in = Current year acquisitions in the acquisition schedule agree with related master file amounts, and the total agrees w/General Ledger

TDB = Foot acquisition schedule, Trace acquisition to master file, Trace to G/L

Question 4

What is the 2) Balance related objective?

TDB?

Answer 4

2) Existence = Current year acquisitions as listed exist

TDB = Examine vendors invoice & receiving report & Physically examine assets

Question 5

What is the 3) Balance related objective?

Answer 5

3) Completeness = Existing acquisitions are recorded

TDB = Examine vendors invoices of closely related accounts such as repair & maintenance to uncover items that should be recorded as equipment

Question 6

What is the 4) Balance related objective?

Answer 6

4) Accuracy = Current year acquisitions as listed are accurate

TDB = Examine Vendor invoices

Question 7

What is the 5) Balance related objective?

Answer 7

5) Cutoff = Current year acquisitions are recorded in the correct period

TDB = Review transactions near B/S date for correct period

Question 8

What is the 6) Balance related objective?

Answer 8

6) Rights = The client has rights to current year acquisitions

TDB = Examine Vendors invoices

Question 9

What is the 7) Balance related objective?

Answer 9

7) classification = current year acquisitions as listed are correctly classified

TDB = Examine Vendor Invoice in Various Equipment accounts to UNCOVER items listed as Manufacturing or office equip part of building or repair exp.

• review repairs & maintenance that should be recorded as equipment
• Examine rent & lease for capitalize lease