Yaeger Sim Review Flashcards
A larger percentage of sales in the last month of the year is…
Likely to result in lowering inventory
What standards provide guidance for reporting on client pro forma financial information?
Statements on Standards for Attestation Engagements (SSAE)
During year 2, the company instituted a new procedure whereby internal audit department distributes payroll checks to employees for selected payroll cycles.
How does this affect risk?
Decreases control risk
When vouchers are sent to the treasurer in order of due date, the triangle symbolizes…
Unpaid Voucher filed by due date
In a letter to the client on internal control related matters should the following statement by included or excluded, if excluded why?
State that the “communication is intended solely for management and external parties.”
Excluded, report is not intended for external parties
The auditor suspects that a kiting scheme exists because an accounting department employee who can issue and record checks seems to be leading an unusually luxurious life.
What audit procedure should be performed?
Prepare bank transfer schedule
The auditor suspects that fictitious employees have been placed on the payroll by the entity’s payroll supervisor, who has access to payroll records and to the paychecks.
What audit procedure should be performed?
Observe payroll check distribution on a surprise basis
The auditor suspects that a lapping scheme exists because an accounting department employee who has access to cash receipts also maintains the accounts receivable ledger and refuses to take any vacation or sick days.
What audit procedure should be performed?
Send requests to confirm the entity’s accounts receivable on a
surprise basis at an interim date.
The auditor suspects that the entity is inappropriately increasing the cash reported on its balance sheet by drawing a check on one account and not recording it as an outstanding check on that account and simultaneously recording it as a deposit in a second account.
What audit procedure should be performed?
Prepare a bank transfer schedule
DietWeb recorded property and equipment acquired during the year that did not actually exist at the balance sheet date.
What substantive procedure should be performed?
Physically examine equipment
Define the risk of assessing control risk too low
The possibility that the assessed level of control risk based on the sample is less than the true operating effectiveness of the controls
What substantive procedure would confirm that the inventory listing is accurately completed and the totals are properly included in the inventory accounts?
Reconcile physical counts to perpetual records and general ledger balances and investigate significant fluctuation
What is a substantive procedure used to test Accounts receivable for completeness?
Trace sales invoice and shipping documents just before year end
To customer account transactions
