IC- Transaction Cycles Flashcards
List 2 access controls applicable to the revenue/receipts (sales transactions) business process.
1-Computer passwords limit access
2-Cash receipts are handled by someone without access to accounts receivable record keeping.
List some procedures used to ensure segregation of duties in the Cash Receipts business cycle.
(by separate individuals):
1-Opening mail, handling checks received, and preparing remittance listing
2-Making deposit (daily)
3-Applying payments received to customer accounts
Preparing bank reconciliation on a timely basis.
List some procedures used to ensure segregation of duties in the Expenditure business cycle.
1-Separate purchasing department
2-Purchasing personnel independent from receiving and recording
3-Bank reconciliations are prepared by someone not having other involvement in handling cash receipts, disbursements, or record-keeping
What comparison techniques can be used by the auditor to ensure appropriateness of transactions in the Expenditure business cycle?
1-Compare suppliers’ monthly statements with recorded payables
2-Compare purchase order to receiving document to vendor’s invoice
What comparisons should be made within the entity to ensure the appropriateness of payroll transactions?
1-Payroll information should be periodically matched to information in personnel files;
2-Payroll checks should be compared to entries on the payroll register;
3-Amounts on the payroll register should be agreed to the applicable general ledger accounts.
Verifying the use of and accounting for prenumbered documents supports management’s financial statement assertion of…?
completeness
The element of the audit planning process most likely to be agreed upon with the client before implementation of the audit strategy is the determination of the..?
Timing of inventory observation procedures to be performed
An auditor suspects that a client’s cashier is misappropriating cash receipts for personal use by lapping customer checks received in the mail. In attempting to uncover this embezzlement scheme, the auditor most likely would compare the…?
dates checks are deposited per bank statements with the dates remittance credits are recorded
How does auditor obtain understanding of the various components for the revenue cycle
[SACRED]
Start (Initiation) transaction process
Authorization
Completion or execution of the flow of docs, services, goods through the system
Recording in financial records
Evaluate Defenses (verification)- checks and balances to make sure system functioning properly
What are the duties to be segregated?
[ARCC-s] Authorization Recording Custody Comparison
Examples of procedures used to understand IC structure related to the spending cycle
[PRAISE]
Physical controls
Recording (rec’v reports for goods purchased, debit memos for goods returned)
Authorization (vouch checks to PO’s, rec’v reports, invoices, vouchers)
Independent checks (client reconciles inventory)
Segregation of duties- use inquiry and observation
Tracing and vouching compliments which assertions?
Completeness and existence, respectively
Sales clerk
Accepts orders from customers and prepares written sales orders using internal prenumbered forms (PPN)
* Recording
Billing clerk
Prepares sales invoice to send to customers
* Recording
Revenue cycle segregation of duties - custody
Authorizing sales, recording A/R, and having custody of inventory
