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ACCT 425 > Lec 16 > Flashcards

Lec 16 Flashcards

1
Q

what are the 4 existence procedures of a/r

A
  • positive confirmation supplemented iwth negative confirmation
  • positive confirmation for every ar over a certain age or amount threshold (significant transaction audit)
  • reperforming of aging schedule
  • vouching sample of a/r recorded a few days before or after fye to shipping documents (also test for cut-off) - usually 5-15 days
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2
Q

what are the 2 completeness procedures for ar

A
  • 0 balance positive confirmation
  • vouching sample of a/r recorded a few days before or after fye to shipping documents (also test for cut-off) - usually 5-15 days
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3
Q

what are the 5 valuation procedures for ar

A
  • reperform calculation for AFDA (AF credit losses)
  • Analysis by comparing current year AFDA and write offs to prior year - consider economy; if worse, afda and write offs increase
  • Examine subsequent cash collections
  • Inquire weather it is a related party
  • Inspection of BoD meeting to identify A/R from related party
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4
Q

what are the 2 pcorcesses for ownership of ar

A
  • Inspect bank confirmations, debt agreements, minutes of BoD for A/R used as security for debt (pledged) or sold A/R (factored)
  • Inquire management about pledged or factored A/R
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5
Q

what are the 5 procedures for ar presentation

A
  • Inspect bank confirmations, debt agreements, minutes of BoD for A/R used as security for debt (pledged) or sold A/R (factored)
  • Inquire management about pledged or factored A/R
    • ALL HERE BECAUSE THEY SHOULD BE IN THE NOTES
  • If sold, completely removed, if pledged, must be disclosed
  • Inquire whether it is a related party and it must be disclosed
    Inspect BoD meetings and determine whether it is related party and it must be disclosed
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6
Q

what are the 2 procedures for notes receivables for existence

A
  • Positive conf. To confirm existence of N/R
  • Inspect N/R document (A/R does not have signed doc.)
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7
Q

what is the procedure for notes receivbale completeness

A
  • 0 balance confirmation
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8
Q

what are hte 2 processes for notes receivable valaution

A
  • Examine subsequent cash collections
  • Recalculate interest received and trace it to the interest income account
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9
Q

what are the 2 existence procedure for sales

A
  • Select a sample of recorded sales transactions and vouch it to supporting documents (invoices, external shipping documents, customer orders, sales order)
  • Select a sample (or all) of sales recorded a few days before or after FYE and vouch them to shipping documents <- test for proper period/cut-off. Usually 5-15 days
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10
Q

what are the 2 procedures for completeness of sales

A
  • Select a sample of source documents and trace to the recorded sales - use block sampling of consecutive items in number or dates etc..
  • Select a sample (or all) of A/R recorded a few days before or after FYE and vouch them to shipping documents <- test for proper period
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11
Q

what are the 3 procedures for valuation of sales

A
  • Obtain production data number of units produced * average sales prices - analysis to get an estimate on $ value of sales
  • With analysis do comparison to prior year and industry
  • Inquire management for sales to related parties
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12
Q

what are the 2 procedures for ownership of sales

A
  • Inspect bank confirmations, debt agreements, minutes of BoD for A/R used as security for debt (pledged) or sold A/R (factored)
  • Inquire management about pledged or factored A/R
    Says every sale has A/R
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13
Q

what are the 3 procedures for presentation of sales (rev rec)

A
  • Inquire management for sales to related parties that must be disclosed
  • Inquire management about what revenue recognition policies they have in place
  • Inspect revenue recognition policies they have in written format
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14
Q

what is the existence procedure for inventory

A

Count inventory from sheet to floor - vouching and inspection

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15
Q

what is the completeness procedure of invenotry

A

Count inventory from floor to sheet - tracing and inspection

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16
Q

what are hte 4 valuation procedures for inventory

A
  • Valued at LCM
  • Inquire management about application of LCM
  • Reperform application of LCM
    Physically inspect inventory in warehouses that is scrapped or damaged
17
Q

what are the 2 rocedures of ownership in iventory

A

inspect bank confirmations, debt agreements, minutes of BoD for inventory used as security for debt (pledged) or on lease
Inquire management about inventory which is on consignment or used as security for debt

18
Q

what are the 5 procedures of presentation for invnetory

A
  • inquire management about application of LCM
  • Reperform application of LCM
  • Physically inspect inventory in warehouses that is scrapped or damaged
  • Inspect bank confirmations, debt agreements, minutes of BoD for inventory used as security for debt (pledged) or sold A/R (factored)
  • Inquire management about inventory which is on consignment or used as security for debt
    ALL MUST BE DISCLOSED
19
Q

what is teh existence procedure for cogs

A

Vouch to supporting document

20
Q

what is the completeness procedure for cogs

A

Trace from cogs to documents

21
Q

what are the 2 valuation procedures for cogs

A
  • Determine if proper application of FIFO, average cost, specific identification is properly applied - accounting costing method/cost flow assumption
    • Uses reperformance
  • Compute various gross margin ratios and compare to industry and analyze them - analysis
22
Q

what is the presentation procedure for cogs

A
  • Cost flow assumption method must be disclosed thus all tests done for valuation are relevant
    • Determine if proper application of FIFO, average cost, specific identification is properly applied - accounting costing method/cost flow assumption
      Compute various gross margin ratios and compare to industry and analyze them - analysis
23
Q

what is the existence procedure for ap

A

Vouch a sample from A/P subledger to supplier statements

24
Q

what are the 2 procedures of comeplteness for ap (important)

A
  • Use confirmation to test for completeness - use negative confirmation because the responding company is incentivised to reply
    Primary purpose is to confirm the lower balances, those below a certain threshold - significant transaction auditing
    Confirm for older 0 bal accounts to ensure there are no new transactions that need be accounted for
  • Search for unrecorded liabilities - combination of several procedures - inquire management, inspection
    Trying to identify if there is any liabilities that are unrecorded
25
Q

what is the valuation procedure for ap

A

Inquiry about related parties

26
Q

what is the presentation procedure fir ap

A

Inquire management for which payable are long term or short term to ensure they are properly presented

ACCT 425 (21 decks)

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