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29 Cards in this Set
- Front
- Back
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The Acquisition and Expenditure cycle is concerned with transaction involving
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1) Purchase of Merchandise & Materials & Material Necessary
2) Subsequent Payment for Puchases |
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Audit Evidence in Management Reports and Data Files
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1-Open purchase orders
2-Unmatched Receiving 3-Unmatched Vendor Invoices 4-Accounts (Vouchers) Payable Trial Balance 5-Purchases Journal 6-Fixed Asset Reports |
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Inherent Risks in Revenue and Collection Cycle
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1-Unrecorded Liabilities
2-Non-Cancelable Purchase Agreements 3-Capitalizing Expenses |
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The 4 parts of the Control Risk Assessment are...
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1-Control Considerations
2-Custody 3-Periodic Reconciliation 4-Test of Controls |
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Two primary means of gathering audit evidence are...
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1-Physical Observation
2-Examination of Documentation |
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Some examples of segration of duties are...
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AUTHORIZATION by purchasing dept.
CUSTODY of inventory by receiving dept Transactions recorded by ACC and AP dept AP dept Authorizes payments of vendors invoice Cash Disbursements has CUSTODY of checks Transactions RECORDED by Acc and Ap depts (payments) |
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Detailed Control Checking Activities consist of...
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Comparing quantities against receiving report and purchase order (recieveing clerk)
Comparing prices on invoice against price list (AP) Mathematically verify vendor's invoice Determine when to pay invoice and prepare voucher (management determines policy) On payment date, voucher package is fwd to cash disbursement department check should be mailed to the payee immediately after it is signed Reconcile bank statements when issued from the bank |
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On payment date, voucher package is fwd to cash disbursement department, what is done?
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Information from voucher package is compared
Check is prepared to the vendor; voucher package should be canceled Check should be signed by the appropriate individual |
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In the Custody portion of the control risk assessment what is done?
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Receiving report prepared when inventory received
Inventory counted and verified Access to inventory is restricted Checks payable to vendor, not "cash" or "bearer" Mechanical check protectors |
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The search for unrecorded liabilities includes...
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Inquire of client personnel about thier procedures for ensuring all liabilities are recorded
Scan open purchase order file-looking for unrecorded purchase commitments Examine unmatched vendor invoices Examine unmatched receiving reports occurring near year-end Trace unmatched receiving reports to accounts payable entries Select sample of cash disbursements occuring AFTER year-end and examine documentation to determine if they should have been recorded as a payable year-end Confirm A/P with normal suppliers (even zero balances) Apply analytical procedures |
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Non Statistical Sampling Methods are...
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Directed Sample Selection
Block Sample Selection Haphazard Sample Selection |
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Directed Sample Selection
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Based on some judgmental criteria established by the auditor
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Block Sample Selection
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Selection of several items in sequence
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Haphazard Sample Selection
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w/o regard to size,source, or other distinguishing characteristics
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Statistical Sampling Methods are...
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Random Sample Selection
Systematic Sample Selection |
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Random Sample Selection
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Every item in the population has an equal chance of being selected
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Systematic Sample Selection
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Select samples based on intervals
# Population/# Sample |
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Probability Proportional to Size is a...
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Systematic Random Selection that treats each dollar as a sampling unit
$ 55,000/20 Units=3.9=4 |
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Attribute Sampling is used in...
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The test of controls
In a yes/no situation |
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Planning the Procedures includes...
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Stating the audit objectives
Defining the deviation (exception) conditions Defining the population |
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Determiming the sample size is based on...
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Sampling risk
Tolerable Exception Rate (TER) Expected Population Exception Rate (EPER) Acceptable Risk of Assessing Control Risk Too Low (ARACR) |
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To be acceptable sample the ....
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Sample exception rate (SER) must = the computed upper exception rate (CUER)
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If population is not acceptable the four choices are...
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1-Revise the TER or ARACR
2-Expand the sample size (only if you think those were the only outliers) 3-Increase assessed control risk 4-Communicate with the audit committee or management |
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Fieldwork Revenue Expense Accounts includes these 3 things?
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1-Testing any revenue and expense accounts that were not tested in conjunction with related balance sheets
2-Analytical procedures to verify overall reasonableness or revenue and expense accounts 3-Scan for unusual transactions |
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Contingency letters include these four things which are?
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1-Listing of pending litigation
2-Description of each item 3-Evaluation of the likelihood of an unfavorable outcome 4-Estimate of the range of potential loss. |
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Audit procedures centered around completeness include these 7 things which are...
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1-Obtaining description and evaluation of litigation and claims
2-Examining documents 3-Obtain assurance from mangement that it has disclosed all claims 4-Read minutes of meetings 5-Read contracts, loan agreements, leases, etc. 6-Obtain information concerning guarantees from bank confirmation 7-Reviewed the legal expense account, cash disbursements records, and invoices related to legal services |
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Management Representation Letter (SAS 85) include....
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Mangements acknoledgement of responsibility
Availiablity of all financial records and related data Managements acknowledgement of its responsibilty for internal controls Disclosure of all significant deficiencies in internal control information concerning signifigant fraud |
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The 2 types of subsequent events are...
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Type 1-Provide new information regarding a condition that existed at the balance sheet date date (adjust statements)
Type 2-Condition that did not exist until after the balance sheet date (disclosure not appropriate) |
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Other final considerations include...
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Ability to continue as a going-concern
Client approval of adjusting entries and financial statement disclosures. Review waived adjustments Audit documentation review |
