Financial Statement Accounts Flashcards
Look for ___________ when auditing Cash and Cash Equivalents
Kiting
What is kiting?
An attempt by the client to overstate the total cash in bank by reporting a receipt in the current period without reporting the equivalent disbursement
How to find kiting
Interbank transfer schedule
Kiting occurs when…
The disbursement per books occurred after year-end but the receipt (per books and/or per bank) occurred before year-end
Three types of Confirmations
Negative
Positive
Blank
When using negative confirmations what must be true?
Auditor’s think everything is okay
RMM \/ CR /\ IC /\
When using Positive confirmation what must be true?
Need a response
For large balances
RMM /\ CR /\
Methods to encourage higher response rate to confirmations
Use Clear Wording
Send Confirmation to specified individual
Identify organization being audited
Have client hand-sign confirmation requests
Set response deadlines
Send second requests
Call respondent to obtain oral confirm and request response to written confirmations
Procedures when customer doesn’t respond to positive or blank confirmation
Send Second Confirmation
Ask client to contact customer and request response
Review cash receipts in subsequent period
Inspect shipping documents
Examine customer correspondence with client
Consider Audit Adjustment
Lapping of A/R
Attempt to cover theft of receivables collection by posting subsequent collection from another customer to that subsidiary account
Receivables should be recorded at what value
NRV
Net Receivable Value (Allowance for Uncollectible Accounts)
Three characteristics of Derivatives
SUN
Settlement in Cash or Equivalents
Will be settled at future date
Underlying and Notional Amount
Value calculated by multiplying the index by number of unites specified in contract
No Net Investment
No payment by either side
Trading Securities (HFT)
Verify stock prices at B/S date through public source, Wall Street Journal
B/S Current Only, Debt/Equity, FMV
I/S **Unrealized gain/loss
Realized gain/loss
Interest & Dividend Income
Cash Flow: Operating Activity
Available for Sale
Verify stock prices at B/S date through public source, Wall Street Journal
B/S: Current/Non-Current Debit/Equity FMV **Unrealized gain/loss on B/S part of Comprehensive Income
I/S: Realized gain/loss, Interest & Dividend Income
Cash Flows: Investing Activity
Held to Maturity
Verify with service such as Moody’s Investment Service and preform analytical procedures to determine reasonableness
B/S: Non-Current, Debt ONLY, Amortized Cost
I/S Realized gain/loss, Interest Income
Cash Flows: Investing Activity
