Day 9 Flashcards
Procedure: obtain assurance that slow moving and obsolete items included in inventories are properly identified
Examine analysis of inventory turnover
What can an accountant do in a Preparation Engagement?
- If requested by MGMT - accountant can omit all stmts required by GAAP
- Accountant can assist MGMT with significant judgements - estimating impairment exp
- Accountant can advise client on which acctg policies to use
Each page = “no assurance provided”
What should the auditor do if engaged to do a Preparation Engagement: if unable to include stmt on each page - “no assurance is provided”?
- Issue a disclaimer of opinion
- Perform a compilation
- Withdraw from the engagement
Descriptive Analytics
What happened or what is happening with the data
What are Diagnostic Analytics used for?
utilized when an Org. wants to understand the underlying cause of results, essentially why something happened with the data
Descriptive Analytic Techniques:
- Summary statistics
- Data sorting
- Aging data
- Data reduction
Diagnostic Analytic Techniques:
- Clustering
- Drill-down & Drill-through analysis
- Data mining
- Variance analysis
- Period-over-period analysis
- Data profiling
- Sequence Check
Predictive Analytics
make predictions, estimates, and assertions about future events
Name types of Predictive Analytic Techniques:
- Regression analysis
- Forecasting
- Time-series modeling
- Classification
- Sentiment analysis
Prescriptive Analytics
Most advanced and complex type
**Build on predictive analytics - how to make something happen
**Prescribe courses of actions to help optimize decisions
Prescriptive Analytic Techniques:
- What-if analysis
- Decision support and automation
- Machine learning
- Natural language processing
Inventory Cycle: What assertion?
Inventory Report —> Prenumbered Inv. Tags
Existence
Inventory Cycle: What assertion?
Prenumbered Inv. Tags —> Inv. Report
Completeness
Inventory Cycle: What assertion?
Test Counts —> Inv. Report
Completeness
Inventory Cycle: What assertion?
Inv. Reports —> Test Counts
Existence
Inventory Cycle: What assertion?
Test Counts —> Prenumbered Inv. Tags
Accuracy
What procedures are used to test Inventory’s Valuation, allocation and accuracy assertion?
- Inquiring about obsolete or damaged goods
- Examining vendor invoices
- Performing Inv. price tests for a sample of Inv.
When to use Emphasis-of-Matter:
(Non-Issuers)
- Justified change in Accounting Principal
- Subsequently discovered facts that lead to a change in audit opinion
- FS are prepared in accordance with an applicable SPECIAL PURPOSE FRAMEWORK
Can be used with Auditor’s Professional Judgement:
Uncertainty related to litigation
**Major catastrophe
**Significant related party transactions
**Going Concern but have been adressed by MGMT and disclosed properly
What is the structure of the Emphasis-of-Matter paragraph and what is included?
- use “Emphasis-of-Matter” heading to communicate KEY AUDIT MATTERS
- Describe the matter and the location of relevant disclosures in the FS
- Indicate the Auditor’s opinion is NOT modified
When to use Other-Matter Paragraphs:
(Non-Issuers)
- In an audit report that restricts the use
- Subsequently discovered facts that lead to a change in audit opinion
- PY FS were audited by another auditor and report was not reissued
- CY FS = Audited and presented in comparative form when PY FS were Reviewed
What factor would the auditor consider most regarding the client’s organizational structure in the context of control risk?
The suitability of the client’s lines of reporting