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Auditing 1 > Final Exam > Flashcards

Final Exam Flashcards

0
Q

What are the Auditor’s Objectives for Cash?

A 
Consider inherent risks
Understand internal controls
Existence
Completeness
Accuracy
Cutoff
Presentation
Rights
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1
Q

What accounts are under cash?

A

Checking
Savings
Petty Cash
Short Term Investments

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2
Q

What are Auditor’s Objectives for Investments?

A 
Consider inherent risks
Understand internal controls
Existence
Completeness
Accuracy
Cutoff
Presentation
Rights
Valuation
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3
Q

What are Auditor’s Objectives for Receivables?

A 
Consider inherent risks
Understand internal controls
Existence
Completeness
Accuracy
Cutoff
Presentation
Rights
Valuation
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4
Q

What are Auditor’s Objectives for Inventories?

A 
Consider inherent risks
Understand internal controls
Existence
Completeness
Accuracy
Cutoff
Presentation
Rights
Valuation
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5
Q

What are Auditor’s Objectives for PPE?

A 
Consider inherent risks
Understand internal controls
Existence
Completeness
Accuracy
Cutoff
Presentation
Rights
Valuation
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6
Q

What are Auditor’s Objectives of Liabilities?

A 
Consider inherent risks
Understand internal controls
Existence
Completeness
Accuracy
Cutoff
Presentation
Obligation
Valuation
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7
Q

What are Auditor’s Objectives of Debt Equity?

A 
Consider inherent risks
Understand internal controls
Existence
Completeness
Accuracy
Cutoff
Presentation
Obligation
Valuation
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8
Q

What are Auditor’s Objectives of Capital Equity?

A 
Consider inherent risks
Understand internal controls
Existence
Completeness
Accuracy
Cutoff
Presentation
Valuation
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9
Q

What account is under investments?

A

Long Term Investments

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10
Q

What are some related accounts to investments?

A

Interest Income

Dividend Income

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11
Q

What are some overall internal controls of Cash?

A 
Received Cash
Recorded Cash
Deposit Cash Timely
Disbursements Authorized
Disbursements Recorded
Adequate Cash Balances
Cash Forecasts Reasonable
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12
Q

What are some overall internal controls of Investments?

A 
Formal Investment Policies
Investment Committee of Board Decides
Separation of Duties
Complete Detailed Records
Securities Registered in Company Name
Periodic Physical Inspection Of Securities
Appropriate Accounting
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13
Q

What are internal control details of cash?

A 
More than one person involved
Separate cash handling and recording
Centralize receiving of cash
Record receipts timely
Customer given receipt
Cash deposited daily
Disbursements by check
Bank reconciliations
Compare to forecasts
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14
Q

What are the audit steps of all categories?

A

A: Understand inherent risk
B: Understand internal controls
C: Asses risk of material misstatements and design further audit procedures
D: Perform further audit procedures: tests of controls
E: Perform further audit procedures: subtantive tests

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15
Q

What are tests of controls for cash?

A

Test accounting records and reconciliations
Cash receipts test
Cash disbursements test

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16
Q

What are substantive tests for cash?

A

1: Obtain analysis of cash balances and reconcile to G/L
2: Bank Confirmations
3: Review/prepare bank reconciliation as of balance sheet date
4: Obtain cutoff bank statement showing transactions at least 7 days after balance sheet date
5: Count and list cash on hand
6: Verify the client’s cutoff of cash receipts and cash disbursements
7: Analyze bank transfers for the last week of audit year and first week of following year
8: Investigate related party transactions
9: Evaluate F/S presentation/disclosure

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17
Q

What are tests of controls for investments?

A

Trace transactions through system
Review/test reports of investment activity
Inspect internal auditor inspection reports
Inspect monthly reports on investments
Revise risk assessment if needed

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18
Q

What are substantive tests for investments?

A

1: Obtain analysis of investment accounts and related revenue gain/loss…reconcile to ledger
2: Inspect securities
3: Confirm with holders
4: Vouch selected purchases/sales…verify client’s cutoff
5: Review investment committee minutes
6: Perform analytical review
7: Recompute revenue from securities
8: Inspect documentation of managements intent regarding derivatives/hedging
9: Evaluate accounting method
10: Test valuation
11: Evaluate F/S presentation/disclosure

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19
Q

What are accounts of receivables?

A

Accounts Receivable
Notes Receivable
Interest Receivable

20
Q

What are related accounts of receivables?

A

Sales
Sales A/R
Sales Discounts
Interest Income

21
Q

What is the account of inventories?

A

Inventory

22
Q

What is the related account to inventories?

A

Cost of Goods Sold

23
Q

What are the overall internal controls of receivables?

A 
Segregation of duties
Credit policies
Customer's orders
Issuing merchandise
Shipping 
Billing
Collections of A/R
Adjustments to sales A/R
24
Q

What are the overall internal controls of inventories?

A

Commitment to competence
Integrity and ethical values
Organization structure

25
Q

What are the internal controls details of receivables?

A

Notes reviewed/authorized

Write-Off of notes approved

26
Q

What are the internal controls details of inventories?

A 
Purchasing
Receiving
Storing
Issuing
Production
27
Q

What are tests of controls of receivables?

A 
Examine sales transactions
Compare shipping doc to invoices
Review use/authorization of credit memos
Reconcile cash register tapes/sales tickets with sales journals
Test IT application
Review revenue estimates
Revise risk assessment if needed
28
Q

What are tests of controls of inventories?

A

Examine purchases

Test cost accounting system

29
Q

What are substantive tests for receivables?

A

1: Obtain aged trial balance of A/R…reconcile to ledger
2: Obtain analyses of N/R and interest
3: Inspect notes on hand and confirm
4: Confirm receivables with debtors
5: Review year end cutoff of sales
6: Perform analytical review
7: Review year end sales contracts
8: Verify interest income & receivable
9: Evaluate accounting methods
10: Evaluate accounting estimates
11: Determine adequacy of allowance for D/A
12: Ascertain whether any A/R pledged
13: Investigate related party receivables
14: Evaluate unusual/significant sales
15: Evaluate F/S presentation/disclosure

30
Q

What are substantive tests for inventories?

A

1: Reconcile inventory listing to G/L
2: Evaluate planning of inventory
3: Observe taking of inventory/test count
4: Review year-end cutoff of purchases/sales
5: Test completed inventory for accuracy…trace test counts
6: Evaluate inventory pricing
7: Test pricing of inventories
8: Perform analytical procedures
9: Determine whether inventories pledged…review purchase/sales commitments
10: Evaluate F/S presentation

31
Q

What accounts are under PPE?

A 
Land
Land improvements
Buildings
Equipment
Accumulated depreciation
32
Q

What accounts are related to PPE?

A

Depreciation Expense

Repairs/Maintenance Expense

33
Q

What accounts are under liabilities?

A 
Accounts Payable
Interest Payable
Salaries Payable
Unearned Revenue
Notes Payable
34
Q

What are the related accounts for liablities?

A

Expenses

Interest Expense

35
Q

What are the overall internal controls of PPE?

A 
Subsidiary ledger
Authorizations/work orders
Variances authorized/actual costs
Policy for capitalizing vs expensing
All purchases through purchasing dept
Physical inventories
Retirement procedures
36
Q

What are the overall internal controls of liabilities?

A

Purchasing
Receiving
Vouchers
Vendor’s statements

37
Q

What are tests of controls of liabilities?

A

Verify posting to A/P subsidiary
Vouch postings to supporting doc
Test IT applications

38
Q

What are substantive tests for PPE?

A

1: Reconcile summary of changes to G/L
2: Vouch addition to PPE
3: Inspect major acquisitions
4: Analyze repair and maintenance expense accts
5: Investigate status of PPE not in use
6: Test depreciation expense/methods
7: Investigate impairments of PPE
8: Investigate retirements of PPE
9: Examine evidence of legal ownership
10: Review rental revenue from leases
11: Examine lease agreements
12: Perform analytical review procedures
13: Evaluate F/S presentation/disclosure

39
Q

What are substantive tests for liabilities?

A

1: Reconcile A/P to G/L
2: Vouch A/P balances to docs
3: Reconcile A/P to creditor statements
4: Confirm A/P with vendors
5: Perform analytical procedures
6: Search for unrecorded liabilities
7: Identify A/P from related parties
8: Evaluate F/S presentation/disclosure

40
Q

What account is under debt equity?

A

Bonds Payable

41
Q

What is the related account to debt equity?

A

Interest expense

42
Q

What are the internal controls for debt equity?

A

Authorization by board
Use of independent trustee
Interest payments

43
Q

What is the account for capital equity?

A

Capital Stock

44
Q

What is the related account of capital equity?

A

Dividends

45
Q

What are the overall internal controls of capital equity?

A 
Board controls stock transactions
Independent registrar and stock transfer agent
Stock certificate book
Stockholders ledger
Dividends
46
Q

What are substantive tests for debt equity?

A

1: Analyze debt and related accounts
2: Examine N/P
3: Confirm debt
4: Vouch borrowing/repayments
5: Perform analytical procedures
6: Recompute int exp, int pay, amortization of disc/prem
7: evaluate whether debt provisions have been met
8: Trace authority for debt issuance with corporate mins
9: Review N/P after B/S date
10: Identify N/P to related parties
11: Send confirmation letters to learn about financing arrangements
12: Evaluate F/S presentation/disclosure

47
Q

What are substantive tests for capital equity?

A

1: Examine articles of incorporation, bylaws minutes
2: Analyze capital stock accounts
3: Account for proceeds from stock issues
4: Confirm shares outstanding
5: Reconcile stockholder’s records with G/L
6: Determine appropriate accounting applied to stock compensation plans
7: Determine compliance with restrictions/preferences pertaining to capital stock and disclosures are appropriate

Auditing 1 (2 decks)

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