Chapter 3 - Cycles Flashcards
What is a sales order?
List of foods ordered by the customer along with prices to be charged
PRE-NUMBERED
What is the bill of lading?
Shipping document that is signed by the carrier
What is a sales invoice and what do you compare it to for accuracy?
Bill prepared and sent to the customer after shipment to request payment.
Compare to sales order and bill of lading
What is the sales register/journal?
Book where sales invoice information is posted
What is the subsidiary receivables ledger?
Book that lists the outstanding receivables with a separate record for each customer
What is a remittance advice?
Document that comes with the check or payment to show the purpose of the check
What is a remittance listing?
Summary of money received that day. Can also be called a pre-list and is prepared by employee first receiving the cash.
What is the cash receipts journal?
Book in which the remittance listings are posted
What is a deposit slip and what is it reconciled to?
Document signed or stamped by the bank to show checks were received.
Reconcile to postings in the cash receipts journal by independent employee
What is a bank reconciliation?
Comparison of the cash balance according to the books to the cash balance according to the bank
What does an auditor look for when concerning understandability and classification?
Making sure all transactions and events have been recorded properly and presented clearly
What does an auditor look for when concerning presentation and disclosure?
The auditor looks to make sure all sales to employees have been marked in the statements as related party transactions
What does an auditor look for when concerning existence or occurrence in the revenue cycle?
The auditor will look to see if all sales that have been recorded have actually taken place
The auditor will vouch from the from the sales invoice to the bill of lading (backward)
What does an auditor look for when concerning rights and obligations for the revenue cycle?
The auditor looks to see if management has the right to collect the receivables
What does an auditor look for when concerning completeness & cut-off in the revenue cycle?
The auditor looks to see that all recorded sales have taken place and they are in the right time period
The auditor will trace from the bill of lading to the sales invoice (forward)
What does an auditor look for when concerning valuation, allocation, and accuracy for the revenue cycle?
The auditor looks to see if all receivables are likely to be collected
What is a purchase requisition?
Internal request for goods to be purchased from an external source
What is a purchase order?
External form mailed to vendor requesting goods be delivered to company
What is a receiving report?
Document prepared in receiving department and signed by carrier to acknowledge the company has received goods
What is a purchase (vendor) invoice?
What is the invoice register?
What is a payment voucher?
Document prepared by the payables clerk to request that a check be written to the vendor
What is the purchase journal (voucher register)?
Book listing all the payment vouchers generated by the company
What is special about the purchase order copy the receiving department receives?
The receiving department’s copy does NOT include quantities for goods ordered
What does the treasurer do immediately after signing a check to pay for external goods?
The treasurer cancels all supporting documents related to the purchase of the goods and mails the check
What are the two assertions an auditor is concerned with when looking at the spending cycle?
Completeness and existence or occurrence
Who is responsible for authorization in the personnel and payroll cycle?
The personnel/HR department
Who is responsible for recording in the personnel and payroll cycle?
The payroll department
Who is responsible for custody in the personnel and payroll cycle?
The treasurer (holds and distributes checks)
Who is responsible for comparison in the payroll and personnel cycle?
The controller (does the bank reconciliation)
What is a service organization?
Organization or segment of organization that provide services to the client that are relevant to internal control.
What is a type 1 report regarding a service organization?
Report on management’s description of a service organization’s controls and suitability of their design.
What is a type 2 report in regards to a service organization?
Report on management’s description of the service organization’s system of controls and suitability of their design and operating effectiveness.
What does an auditor look for when concerning presentation and disclosure for the investing and financing cycle?
The auditor looks to see if securities are classified correctly in trading, available for sale, or held to maturity
What does an auditor look for when concerning existence or occurrence for the investing and financing cycle?
The auditor is looking to see if the securities purchased actually exist.
Vouch from the agreement of the broker advices to the cancelled checks
What does an auditor look for when concerning rights and obligations for the investing and financing cycle?
What does an auditor look for when concerning completeness and cut-off for the investing and financing cycle?
The auditor looks to see if all securities are accounted for.
Compare list of securities per bank safe deposit to the listing per records
What does an auditor look for when concerning valuation, allocation, and accuracy for the investing and financing cycle?
The auditor looks to see if the securities were valued correctly. Compare current market prices with listed values of securities.
What assertions is an auditor most concerned about regarding plant, property, and equipment?
Existence and completeness
