UPDATED AUDITING SHORT ANSWER CHAPTER 10,11,13,14 Flashcards
Ch. 10
When auditing cash, what assertion is the most important, and how can we test this?
Existence.
We can test this through Vouching, Inquiries, Physical examination
Ch. 10
When auditing the revenue process, what are the test of controls?
Inquiry of client personnel
Inspection of documents and records
Observations of the operation of the control
Walkthroughs
Reperformance of the control activities
Ch. 10
What are substantive analytical procedures and test of details used for?
Substantive analytical procedures - are used to examine plausible relationships among revenue related accounts.
Tests of details - focus on transactions, account balances, or disclosures. Tests of details concentrate on the ending balance for accounts receivable and related accounts as well as related disclosures.
Ch. 10
When the auditor does not receive responses to positive confirmations, alternative audit procedures are used. These alternative procedures include:
Examination of specific subsequent cash receipts
Examination of shipping documentation
Examination of other client documentation
Ch. 10
Five-Step Approach to Revenue Recognition
Step 1: Identify the contract(s) with a customer
Step 2: Identify the performance obligations in the contract.
Step 3: Determine the transaction price.
Step 4: Allocate the transaction price to the performance obligations in the contract.
Step 5: Recognize revenue when the entity satisfies a performance obligation.
Ch. 10
Positive Confirmation
Requests that customers indicate whether they agree with the amount due to the client. A response is expected whether the customer agrees or disagrees with the balance indicated.
Ch. 10
Negative Confirmation
Requests that the customer respond only when they disagree with the amount due to the client. Negative confirmations are used when the client has many small account balances and control risk is assessed as low.
Ch. 11
Overview of the Purchasing Process
Purchase requisition
Purchase order
Receiving report and liability recorded
Vendor
Ch. 11
When auditing the Purchasing Process, what are examples of test of controls for the following:
Occurrence
Completeness
Authorization
Accuracy
Cutoff
Classification
Presentation
Occurrence - Observe and evaluate proper segregation of duties
Completeness - Review procedures for accounting for numerical sequence of purchase orders.
Authorization - Examine purchase requisitions or purchase orders for proper approval.
Accuracy - Recompute the mathematical accuracy of vendor invoice.
Cutoff - Compare the dates on receiving reports with the dates on the relevant vouchers.
Classification - Review purchases journal and general ledger for reasonableness.
Presentation - Review purchases journal and general ledger for proper aggregation or disaggregation of purchase transactions, and determine if disclosure is needed
Ch. 11
What are the test of details when auditing the purchasing process?
- Examining Purchase Orders and Invoices:
- Reviewing Payments:
- Assessing Internal Controls:
- Sales Contracts
Ch. 13
What are the Tests of Details when auditing the inventory management process?
Production Schedule
Receiving Report
physical inventory counts
Sales Invoices
Ch. 13
When auditing the inventory management process, what are examples of test of controls for the following:
Occurrence
Completeness
Authorization
Accuracy
Cutoff
Classification
Presentation
Occurrence - Observe and evaluate proper segregation of duties
Completeness - Review and test entity’s procedures for consignment goods.
Authorization - Review authorized production schedules
Accuracy - Review and test procedures for taking physical inventory
Cutoff - Review and test procedures for processing inventory
Classification - Review the procedures and forms used to classify inventory
Presentation - Review inventory reports, general ledger and chart of accounts for proper aggregation or disaggregation
Ch. 19
Rules of Professional Conduct
Professional Behaviour: In carrying out their responsibilities as professionals, members should conduct themselves in a manner that will maintain the good reputation of the profession.
Integrity and Due Care: To maintain and broaden public confidence, members should perform all professional responsibilities with the highest sense of integrity as well as observing the profession’s technical and ethical standards.
Objectivity: A member should maintain objectivity and be free of conflicts of interest in discharging professional responsibilities. A member in public practice should be independent in fact and appearance when providing auditing and other assurance services.
Professional Competence: A member strive continually to improve competence and the quality of services by staying current on developments in their professional services.
Confidentiality: A member protects confidential information acquired in providing services and establishing business relationships.
Ch. 10
When auditing the revenue process, what are examples of test of controls for the following:
Occurrence
Completeness
Authorization
Accuracy
Cutoff
Classification
Presentation
Occurrence - Observation and evaluation of proper segregation of duties
Completeness - Review and testing of client’s procedures for accounting for numerical sequence of shipping documents and sales invoices
Authorization - Review of client’s procedures for granting credit
Accuracy - Examination of sales invoice for evidence that client personnel verified mathematical accuracy
Cutoff - Comparison of the dates on sales invoices with the dates of the relevant shipping documents
Classification - Review of sales journal and general ledger for proper classification
Presentation - Review disclosure checklist and related disclosures for relevance and completeness
