Payroll etc. Flashcards
What is the personnel dept’s objective?
planning, controlling, and coordinating EEs
They determine the proposed salary increases (recommended by EE’s supervisors) are consistent with the company salary guidelines and will approve changes in deductions.
What are mgmt’s objectives in est and maintaining an internal control structure?
Transactions are executed in accordance with mgmt’s general or specific auth.
- transactions are recorded as necessary to permit preparation of the FS in accordance with GAAP and to maintain accountability for assets
- Access to assets is permitted only in accordance with mgmt’s authorization
- the recorded accountability for assets is compared with the existing assets at reasonable intervals and differences are investigated and resolved. ensuring that custody of WIP and Finished goods are properly maintained is an example of the 3rd obj,
Inventory turnover
COGS / avg inventory
Days sales in AR
AR / credit sales per day
with credit sales per day = total credit sales / 365
gross profit ratio
sales - COGS / sales
If the auditor desires to further reduce the assessed level of control risk, they must first consider whether..
additional evidence will be available to support such a reduction. the auditor must also consider whether it would be cost effective to collect such evidence
when obtaining an understanding of an entitys internal control procedures, an auditor should concentrate on the substance of the procedures, rather than their form, bc
mgmt may est. appropriate procedures but not enforce compliance with them.
when assessing an internal auditors competence, a cpa ordinarily obtains info about all of the following:
Quality of working paper documentation
Educational level and professional experience
Audit programs and procedures
Decision table
presents in tabular form, the conditions and alternative actions related to making a particular decision. it emphasizes logical relationships among conditions and actions
which assertions are specific to account balances at period end
existence
completeness
rights and obligation
valuation and allocation
assertions about presentation and disclosure
occurrence and rights and obligation
completeness
classification and understandability
accuracy and valuatio
assertions about classes of transactions and event during the period
accuracy
occurrence
completeness
cutoff
sufficiency of audit evidence relates to
the quantity of evidence required to support a conclusion in the circumstance
Appropriate evidence means that it is …
relevant and reliable
cutoff
transactions and events that have been recorded in the proper period
what are the 3 categories of assertion
assertions about classes of transactions and events
assertions about acct balances at the period end
assertions about presentation and disclosure
audit risk
the risk that material miss. will not be detected due to the early testing at interim.
what does the auditor do during the review stage
assess the conclusions reached and the evaluation of the overall FS presentation. as part of that evaluation, they would consider whether the results of the audit procedures performed affect the risk of mm due to fraud.
Before applying principal sub. tests to an entity’s AR at an interim date, an auditor should
asses the difficulty in controlling the incremental audit risk
tests of internal controls are intended to provide a basis for an auditor to conclude whether
the control procedures are operating effectively
what are the 3 categories of audit procedures
risk assessment procedures
tests of controls
substantive procedures
what are substantive procedures
performed to detect MM at the relevant assertion level. consists of test of details and substantive analytical procedures
Judgmental misstatements
Unreasonable acct estimates as well as the selection of inappropriate acct policies.
Factual misstatement
Inaccuracy in acct processing data
misapplication of acct principles
Difference between the classification of a reported FS element and the classification according to GAAP
the AU C 230 states that the degree of doc for a particular audit area should be affected by:
the risk of MM
extent of judgment
nature of the auditing procedures
significance of the evidence obtained
nature and extent of the exceptions identified
the need to document a conclusion that is not obvious from the doc of the work.
Documentation release date
AICPA - A should complete the assembly of the final audit file no later than 60 days after the “report release date” (PCAOB - 45 days)
