exam Flashcards
What are the assertions for the income statement
Completeness, occurrence, accuracy, cut-off, classification
What are the assertions for the balance sheet
Existence, rights and obligations, completeness, valuation and allocation
What is occurrence for the income statement
Have the transactions that have been recorded and occurred actually happened such as did the sales actually happen
What is completeness in the income statement
All transactions that should be recorded have been recorded
What is accuracy in the income statement
have things been recorded at the right amount
What is cut off in the income statement
Transactions have been recorded in the correct accounting period
What is classification in the income statements
transactions have been recorded in the proper accounts
What is the test for occurrence
Select a sample of entries from the sales general ledger and then match to the source document such as sales invoice
What is the test for completeness
Select a sample of customer orders and trace the sales invoices to the sales account in the general ledger
What is the existence in the balance sheet
Assets, liabilities do they actually exist
What is the rights and obligations in the balance sheet
does the entity hold the control and rights over the assets and liabilities
what is completeness in the balance sheet
All assets that should be recorded are recorded
What is valuation and allocation in the balance sheet
Ensuring the assets are valued at the right amount not over or under stated
Most important assertions for cash
Existence, completeness, rights and obligations
What procedure can auditors do to test cash
request bank comfirmation, bank reconciliation
What are the most important assertions for sales
Occurrence, cut-off and accuracy
What procedure can auditors do to test sales
the occurrence test, match prices between sales invoice and master price list, check that the sales before and after balance date are in the right period
What are the important assertions for accounts receivable
Existence, valuation and completeness
What procedure can auditors do to test accounts receivable
Debtor confirmation, substantive testing of sales invoices,
What is the important assertions for purchases
accuracy, completeness and cut-off
What procedure can auditors do to test purchases
do the completeness test, check the dollar amount on the purchase documents, check the dates before and after balance date to make sure they are in the right period.
What is the important assertions for inventory
Existence and valuation
What procedure can auditors do to test inventory
inspect the stock take, analytical procedures, pricing testing,
What is an unmodified opinion
The report is true and fair
what is a modified opinion
where there might be a material misstatement
What is the modification that doesn’t effect the auditors opinion
Emphasis of matter
Modifications that effect the auditors opinion
Qualified opinion, adverse opinion and disclaimer opinion
What is an adverse opinion
indicating that a company’s financial statements are misrepresented, misstated, and do not accurately reflect its financial performance - does it effect the whole report
What is a disclaimer opinion
the auditor could not obtain sufficient evidence to form an opinion on the financial statements
What is emphasis of matter opinion
that everything is allgood but there is something they need to disclose
What is going concern
a company that is financially stable enough to meet its obligations and continue its business for the foreseeable future.
Subsequent events - adjusting
when there is changes in the financial report between the balance date and the authorisation date
Examples of an adjusting event
Bankruptcy of client after year end which is considered a doubtful debt
Subsequent events - non adjusting
do no result in changes in the financial statements
Examples of non adjusting events
loss of assets due to fire or flood
If there is a problem with the material what opinion should be given
Qualified`
If the problem effects the whole financial statement and is pervasive then which opinion
Adverse
What are the 7 objectives for internal controls
Real, recorded, valued, classified, summerised, posted and timely
What does real refer too and what assertions effect it
no duplication transactions - occurrence, existence
What does recorded refer too and what assertions effect it
to prevent wrong transactions - accuracy, completeness
What does value refer too and what assertions effect it
that the correct amount is allocated to transactions - accuracy, valuation
What does classified refer too and what assertions effect it
the transaction is charged to the right account - accuracy, valuation and classification
What does summerised refer too and what assertions effect it
that the total of the transaction is correct - accuracy, value
What does posted refer too and what assertions effect it
that accumulated totals in the general ledger are correct - accuracy, classification
What does timely refer too and what assertions effect it
that transactions are recorded in the right period - cut-off completeness
how can entities monitor internal controls
security of assets and records, segregation of duties, performance review budget vs actual,
how could approving credit be more controled
have a credit limit, have a credit committee,
how could shipping goods be more controled
having picking and delivery documents, monthly reconciliation on picking slips,
How could processing orders be more controled
three way match order with order doc, dispatch doc and sales invoice
What procedures need to be done for accuracy
Making sure the time sheets are matching the invoice and pre numbered, matching the sales invoices with the master price sheet
What procedure need to be done for completeness
Match the source document with a general ledger, test for cut off, invoices not yet being recorded, bank confirmation
What procedures need to be done for occurrence
Match the general ledger to the source documents, match the sales journal to the pre numbered receipts
What procedures need to be done for existence
Debtor confirmation, stock takes
What procedures need to be done for valuation
Bank confirmation,
Cut-off procedures
examine the invoices for the new year to see if they are in the right period
