Mnemonics & Important info Flashcards
What are the elements of quality control?
HELP ME
Human Resources
Engagement/ Client Acceptance & Continuance
Leadership Responsibilities
Performance of Engagement
Monitoring (Ongoing Evaluation)
Ethical Requirements
What are management’s Assertions?
COVER U
C - Completeness
O - Cut Off
V - Valuation, Allocation, Accuracy
E - Existence and Occurrence
R - Rights and Obligations
U - Understandability and Classification
What are the 5 components of Internal Controls
CRIME
Control Environment - (Participation of those charged with governance, Assignment of authority, responsibility, and accountability, HR policies and practices)
Risk Assessment - (Adoption of new accounting principles, new personnel, Incorporation of new tech, Corp Restructuring)
Information and Communication - (Proper presentation of transactions and related disclosures, Measurement and recording of proper monetary values, The way in which significant events are captured by accounting system)
Monitoring - (Internal audit function)
Existing Control Activities - (Authorization of transactions, Segregation of duties, Pre-numbering of documents, Operating performance reviews)
These are the means used by the entity to help achieve its objectives.
- Reliability of financial reporting
- Effectiveness and efficiency of operations
- Compliance with applicable laws and regulations
What do strong internal controls have?
PAID TIPS
Pre numbering of documents
Authorization of transactions
Independent checks to maintain asset accountability Documentation
Timely and appropriate financial performance reviews Information processing controls
Physical controls for safe guarding assets
Segregation of duties
Segregation of duties is your ARC to protect you - Authorization - Record Keeping - Custody
How do you document internal controls?
Document them anyway you FIND
Flowchart
Internal control questionnaire
Narrative
Documentation from client
What are the segregation of duties for IT?
COPAL
Control Team
Operator
Programer
Analyst (System)
Librarian
What are the fraud risk factors?
RIO
Rationalization/attitude
Incentive/pressure
Opportunity
What are the procedures used to obtain evidence?
C the FIVE CARROT WARS
Confirmations
Footing, cross footing and rx
Inquiry
Vouching –> Existence and Occurrence
Examination / Inspection
Cutoff Review
Analytical Procedures
Re-performance
Reconciliation
Observation
Tracing –> Completeness
Walkthrough
Auditing related accounts simultaneously - LT Liabilities and int. expense - Capital add’t and repair and maint. exp - Investments, Dividends, and int. income
Representation Letter (at conclusion)
Subsequent Events Review
When is an emphasis of matter paragraph required?
Used for Nonissuers “GAASP”
Going concern (substantial doubt of)
Accounting principle change that was justified and has a material effect on the entity’s F/S
Audit opinion changed due to subsequently discovered facts
Special Purpose framwork is used to prepare F/S
May also be used:
- An uncertaintly related to outcome of unusual important litigation
- Major catastrophe having significant effect on entity’s fin. position
- Significant related parties transactions
- Unusual important subsequent events
What evidence should the auditor examine regarding going concern uncertainty?
The auditor should examine the following before he ADMITS there may be a going concern uncertainty.
Analytical Procedures
Debt Compliance
Minutes
Inquiry of legal counsel
Third Parties
Subsequent events
What factors may indicate substantial doubt?
If substantial doubt exists, everything is not FINE
Financial Difficulties - loan defaults, debt restructuring, disposal of substantial assets.
Internal Matters - work stoppages, significant revision of operations
Negative Trends - negative cash flows, adverse financial ratios
External Matters - legal, new legislation, loss of key franchise, license, or patent, principal customer.
What are the attestation standards?
CAPE CORP
- Compliance with all attestation standards relevant to the engagment
- Acceptance and continuance are satisfactorily performed
- Preconditions are present
- Engagement documentation standards for timeliness, retention, ownership, and confidentially apply
- Change in the terms of an engagement is acceptable, if reasonable
- Other practitioner’s work may be used
- Responsibility for quality control
- Professional skepticism and professional judgement required
What conditions must exist for an auditor to accept an agreed-upon procedures engagement?
I AM SURE
- Independence
- Agreement of the parties as to procedures and criteria
- The subject matter must be capable of consistent Measurement
- Specified party takes responsibility for the Sufficiency of the designated procedures
- Use of report is restricted to the specified parties
- The client is Responsible for the subject matter
- Engagements to perform agreed-upon procedures on prospective F/S must include a summary of significant assumptions used for the prospective f/s
What procedures must the auditor perform during a review?
U LIAR CPA
*Inquiry of internal NOT external individuals
