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Audit > Audit Cycles > Flashcards

Audit Cycles Flashcards

1
Q

What duties should be segregated for the inventory cycle?

A
  1. Purchasing
  2. Receiving
  3. Warehouse
  4. Shipping
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2
Q

What are the required dual purpose tests for inventory balance?

A

observation of beg and end physical inventory counts. including:
Evaluate mgmt instructions and procedures
 Observe performance of mgmt count procedures
 Inspect inventory to ascertain existence and condition
 Perform test counts

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3
Q

What assertions are associated with inventory balances?

A
  • Completeness
  • valuation, allocation, accuracy
  • existence and occurrence
  • rights and obligations
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4
Q

How do you test completeness for inventory account bal?

A 
Trace test counts to
report. Trace
prenumbered tags to
physical inventory
report sheets.
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5
Q

How do you test valuation, allocation and accuracy for inventory acct bal?

A 
Test accuracy of inventory
report and reconcile to GL.
Inquire about obsolete or
damaged goods. Scan
records for slow moving
inventory. Examine
vendor invoices, review
DL rates, recompute
overhead rates and review
variance analyses.
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6
Q

How do you test existence and occurrence for inventory acct bal?

A 
Observation of
inventory count.
Verify physical
inventory report to
items and test count.
Vouch inventory
report sheet to
prenumbered
inventory tags.
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7
Q

How do you test rights and obligations for inventory acct balances?

A

Review shipping
terms and consigned
inventory

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8
Q

How do you test completeness for inventory presentation and disclosure?

A

ensure required disclosures are present

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9
Q

How do you test valuation, allocation, and accuracy for inventory presentation and disclosure?

A

read footnotes and make sure they are correct

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10
Q

how do you test rights and obligations for presentation and disclosure for inventory

A 
Inquire of mngmt
Read loans minutes.
Inquire about
warranty
obligations.
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11
Q

How do you test understandability and classification for presentation and disclosure for inventory

A 
Read required
disclosures. Review
inventory records for
proper classification
of RM, WIP, Finished
Goods.
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12
Q

What duties should be segregated for investment cycle?

A

o Authorization of purchase or sale of investments = BoD
o Custody of investments
 Independent 3rd party
 Minimum = joint by two company officials, safe deposit box
 If held by company, periodic count and reconciliation w/ investment subsidiary ledger
o Record keeping

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13
Q

What are the substantive test of details for investment cycle?

A

focused on ending balance

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14
Q

How are analytical procedures used for investment income?

A

reasonableness of gains and losses

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15
Q

How do you test completeness for investment account bal?

A 
Search for
unrecorded
purchases by
examine after YE
purchases. Confirm
securities held by
custodian. Request
information from
counter party.
Analytical
procedures for
expected interest
earned to actual
interest earned
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16
Q

How do you test valuation, allocation, and accuracy for investment acct bal?

A 
Foot investments by
category and agree to GL.
Review sched of
investment activity.
Corroborated YE fair
values from published
sources or independent
broker-dealer. Recalc YE
investments at amortized
cost. Look at significant
influence. Impairment.
Assess assumptions and
market variables.
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17
Q

How do you test existence and occurrence for investment acct bal?

A 
Confirmation of
securities.
Examination of
securities on hand.
Analytical
procedures.
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18
Q

How do you test rights and obligation for investment account balances?

A 
Confirmation of
securities.
Examination of
securities on hand.
Examine broker
advices and verify
ownership.
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19
Q

How do you test completeness for investment transactions?

A 
Analytical
procedures on
reasonableness of
dividend and interest
income.
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20
Q

How do you test cutoff for investment transactions

A

Review that purchases, sales, and investment income has been recorded in correct period

21
Q

How do you test valuation, allocation, and accuracy for investment transactions?

A 
independent calculations on
expected gains, losses and
amortization. Recalculate
dividend and interest
income. Compare to
Moody's.
22
Q

How do you test existence and occurrence for investment transactions?

A 
Analytical
procedures on
reasonableness of
dividend and
interest income.
23
Q

How do you test understandability and classification for investment transactions?

A 
Review transactions
for proper
classification.
Unrealized G/L on
available for sale =
OCI. Unrealized G/L
on trading = income
24
Q

How do you test completeness for presentation and disclosure for investments?

A

determine whether all req. marketable security and derivative disclosures have been made

25
Q

How do you test valuation, allocation, and accuracy for presentation and disclosure for investments?

A

read footnotes and determine if its accurate

26
Q

How do you test rights obligations, and occurrence for presentation and disclosure for investments

A 
Inquire of mngmt.
Read loans &
minutes to
determine if pledged
as collateral
27
Q

How do you test understandability and classification for investments?

A

read disclosures

28
Q

What are the duties that should be segregated for the revenue cycle?

A
  1. Authorization
  2. Record Keeping
  3. Custody
29
Q

What is the risk of overstatement for the revenue cycle?

A
  • recording fictitious sales

- hold open the sales journal into next year

30
Q

How do you audit completeness for AR?

A

obtain AR TB and trace total to GL control acct

31
Q

how do you test valuation, allocation and accuracy for AR?

A

confirm adequacy of AFDA

32
Q

How do you test existence and occurrence for AR?

A

confirm sample of AR

33
Q

How do you test rights and obligations for AR?

A

bank confirmations and debt agreements for liens

34
Q

How do you audit sales transactions for completeness?

A

trace sample of shipping documents to the corresponding sales invoices and to the sales journal

35
Q

How do you audit cutoff sales transactions

A

look at invoices before and after YE

36
Q

How do you audit sales transactions for valuation, allocation, and accuracy?

A

compare prices from invoices to authorized price list

37
Q

How do you audit sales transactions for existence and occurrence?

A

vouch sales transactions from the sales journal to the sales invoice back to the customer order and shipping documents

38
Q

How do you audit sales transactions for understandability and classification?

A

proper classification into the appropriate revenue accounts

39
Q

What duties should be segregates for expenditures?

A
  • purchasing
  • receiving
  • vouchers payable
  • treasury
40
Q

How do you audit AP for completeness

A

search unrecorded liabilities

41
Q

How do you audit AP for valuation, allocation, and accuracy?

A

foot AP listing

42
Q

How do you audit AP for existence and occurrence?

A

vouch amounts from the accounts payable listing to voucher packages

43
Q

How do you audit AP for rights and obligations?

A

review a sample of voucher packages to verify that AP are owed by the entity

44
Q

How do you audit purchase transactions for completeness?

A

trace a sample of vouchers to the purchase journal

45
Q

how do you audit purchase transactions for cutoff

A

compare dates on vouchers with the dates the transactions were recorded in the purchase journal

46
Q

How do you audit purchase transactions for valuation, allocation and accuracy

A

recompute invoice for mathematical accuracy

47
Q

How do you audit purchase transactions for existence and occurrence

A

sample of vouchers for the authorizations and the presence of the receiving report

48
Q

How do you audit the purchase transactions for understandability and classification?

A

verify the account classification of a sample of purchases

Audit (6 decks)

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