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Auditing Theory and Practice > Chapters 10-15 Summary > Flashcards

Chapters 10-15 Summary Flashcards

1
Q

Cash - Accounts

A
  • Checking
  • Savings
  • Petty Cash
  • Short Term Investments
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2
Q

Cash - Related Accounts

A
  • None
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3
Q

Cash - Auditor’s Objectives

A
  • Consider Inherent Risks
  • Understand Internal Controls
  • Substantiate Existence
  • Determine Accuracy
  • Establish Completeness
  • Verify Cutoff
  • Determine Rights
  • Presentation & Disclosures
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4
Q

Cash - Internal Controls - Overall

A
  • Received cash
  • Recorded Cash
  • Deposited cash timely
  • Disbursements authorized
  • Disbursements recorded
  • Adequate cash balances
  • Cash forecasts reasonable
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5
Q

Cash - Internal Controls - Detail

A
  • More than one person involved
  • Separate cash handling/record keeping
  • Centralize receiving of cash
  • Record receipts timely
  • Customer given receipt
  • Cash deposited daily
  • Disbursements by check
  • Bank reconciliations
  • Compare to forecasts
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6
Q

Cash - Audit Steps

A
  • Understand inherent Risks
  • Understand Internal Controls
  • Assess Risks of material misstatements and design further audit procedures
  • Perform further audit procedures - Tests of Controls:
  • Perform other audit procedures - Substantive tests:
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7
Q

Cash - Audit Steps - Tests of Controls

A
  • Test accounting records and reconciliations
  • Cash receipts test
  • Cash disbursements test
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8
Q

Cash - Audit Steps - Substantive Tests

A
  1. Obtain analysis of cash balances; Reconcile them to the G/L
  2. Bank Confirmations
  3. Review/prepare bank reconciliation as of the balance sheet date; Consider reconciling other months
  4. Obtain cutoff bank statement showing transactions at least 7 days after balance sheet date
  5. Count and list cash on hand
  6. Verify the client’s cutoff of cash receipts and cash disbursements
  7. Analyze bank transfers for the last week of audit year and 1st week of the following year
  8. Investigate related party transactions
  9. Evaluate F/S presentation/disclosure
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9
Q

Investments - Accounts

A
  • Long Term Investments
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10
Q

Investments - Related Accounts

A
  • Interest Income
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11
Q

Investments - Auditor’s Objectives

A
  • Consider Inherent Risks
  • Understand Internal Controls
  • Substantiate Existence
  • Determine Accuracy
  • Establish Completeness
  • Verify Cutoff
  • Determine Rights
  • Presentation & Disclosures
  • Proper Valuation
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12
Q

Investments - Internal Controls - Overall

A
  • Formal investment policies
  • Investment committee of board decides
  • Separation of duties
  • Complete detailed records
  • Securities registered in Company name
  • Periodic physical inspection of securities
  • Appropriate accounting
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13
Q

Investments - Internal Controls - Detail

A
  • None
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14
Q

Investments - Audit Steps

A
  • Understand inherent Risks
  • Understand Internal Controls
  • Assess Risks of material misstatements and design further audit procedures
  • Perform further audit procedures - Tests of Controls:
  • Revise risk assessment if needed
  • Perform other audit procedures - Substantive tests:
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15
Q

Investments - Audit Steps - Substantive Tests

A
  1. Obtain analysis of investment accounts and related revenue, gain/loss; Reconcile to ledger
  2. Inspect securities
  3. Confirm with holders
  4. Vouch selected purchases/sales; Verify client’s cutoff
  5. Review Investment committee minutes
  6. Perform analytical review
  7. Recompute revenue from securities
  8. Inspect documentation of management’s intent regarding derivatives/hedging
  9. Evaluate accounting method
  10. Test valuation
  11. Evaluate F/S presentation/disclosure
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16
Q

Investments - Audit Steps - Tests of Controls

A
  • Trace transactions through system
  • Review/test reports of investment activity
  • Inspect internal auditor inspection reports
  • Inspect monthly reports on investments
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17
Q

Receivables - Accounts

A
  • Accounts Receivable
  • Notes Receivable
  • Interest Receivable
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18
Q

Receivables - Related Accounts

A
  • Sales
  • Sales R/A
  • Sales Discounts
  • Interest Income
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19
Q

Receivables - Auditor’s Objectives

A
  • Consider Inherent Risks
  • Understand Internal Controls
  • Substantiate Existence
  • Determine Accuracy
  • Establish Completeness
  • Verify Cutoff
  • Determine Rights
  • Presentation & Disclosures
  • Proper Valuation
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20
Q

Receivables - Internal Control - Overall

A
  • Segregation of duties
  • Credit policies
  • Customer’s orders
  • Issuing Merchandise
  • Shipping
  • Billing
  • Collections of A/R
  • Adjustments to Sales/A/R
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21
Q

Receivables - Internal Control - Detail

A
  • Notes reviewed/authorized
  • Write-off of notes approved
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22
Q

Receivables - Audit Steps

A
  • Understand Inherent Risks
  • Understand Internal Controls
  • Assess Risks of material misstatements and design further audit procedures
  • Perform further audit procedures - Tests of Controls:
  • Revise risk assessment if needed
  • Perform other audit procedures - Substantive tests:
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23
Q

Receivables - Audit Steps - Tests of Controls

A
  • Examine sales transactions
  • Compare shipping doc to invoices
  • Review use/authorization of credit memos
  • Reconcile cash register tapes & sales tickets with sales journals
  • Test IT application
  • Review revenue estimates
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24
Q

Receivables - Audit Steps - Substantive Tests

A
  1. Obtain aged trial balance of A/R; reconcile to ledger
  2. Obtain analyses of N/R and interest
  3. Inspect notes on hand and confirm
  4. Confirm receivables with debtors
  5. Review year-end cutoff of sales
  6. Perform analytical reviews
  7. Review year end sales contracts
  8. Verify interest income & receivable
  9. Evaluate accounting methods
  10. Evaluate accounting estimates
  11. Determine adequacy of Allow for D/A
  12. Ascertain whether any A/R pledged
  13. Investigate related party receivables
  14. Evaluate unusual/significan sales
  15. Evaluation F/S presentation/Disclosure
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25
Q

Inventories - Accounts

A
  • Inventory
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26
Q

Inventories - Related Accounts

A
  • Cost of Goods Sold
27
Q

Inventories - Auditor’s Objectives

A
  • Consider Inherent Risks
  • Understand Internal Controls
  • Substantiate Existence
  • Determine Accuracy
  • Establish Completeness
  • Verify Cutoff
  • Determine Rights
  • Presentation & Disclosures
  • Proper Valuation
28
Q

Inventories - Internal Controls - Overall

A
  • Commitment to competence
  • Integrity and ethical values
  • Organization structure
29
Q

Inventories - Internal Controls - Detail

A
  • Purchasing Function
  • Receiving function
  • Storing function
  • Issuing function
  • Production function
30
Q

Inventories - Audit Steps

A
  • Understand inherent Risks
  • Understand Internal Controls
  • Assess Risks of material misstatements and design further audit procedures
  • Perform further audit procedures - Tests of Controls:
  • Revise risk assessment if needed
  • Perform other audit procedures - Substantive tests:
31
Q

Inventories - Audit Steps - Tests of Controls

A
  • Examine purchases
  • Test cost accounting system
32
Q

Inventories - Audit Steps - Substantive Tests

A
  1. Reconcile inventory listing to G/L
  2. Evaluate planning of inventory
  3. Observe taking of inventory/test count
  4. Review year-end cutoff of purchases/sales
  5. Test completed inventory for accuracy; Trace test counts
  6. Evaluate inventory pricing
  7. Test pricing of inventories
  8. Perform analytical procedures
  9. Determine whether inventories pledged; Review purchase/sales commitments
  10. Evaluate F/S presentation/disclosure
33
Q

PPE - Accounts

A
  • Land
  • Land Improvements
  • Buildings
  • Equipment
  • Accumulated Depreciation
34
Q

PPE - Related Accounts

A
  • Depreciation Expense
  • Repairs/Maintenance Expense
35
Q

PPE - Auditor’s Objectives

A
  • Consider Inherent Risks
  • Understand Internal Controls
  • Substantiate Existence
  • Determine Accuracy
  • Establish Completeness
  • Verify Cutoff
  • Determine Rights
  • Presentation & Disclosures
  • Proper Valuation or allocation
36
Q

PPE - Internal Controls - Overall

A
  • Subsidiary ledger
  • Authorizations/work orders
  • Variances authorized/actual costs
  • Policy for capitalizing vs expensing
  • All purchases through purchasing dept
  • Physical inventories
  • Retirement procedures
37
Q

PPE - Internal Controls - Detail

A
  • None
38
Q

PPE - Internal Controls - Audit Steps

A
  • Understand Inherent Risks
  • Understand Internal Controls
  • Assess Risks of material misstatements and design further audit procedures
  • Perform further audit procedures - Tests of Controls:
  • Revise risk assessment if necessary
  • Perform other audit procedures - Substantive tests:
39
Q

PPE - Internal Controls - Tests of Controls

A
  • Nature of tests of controls
40
Q

PPE - Internal Controls - Substantive Tests

A
  1. Reconcile summary of changes to G/L
  2. Vouch addition to PPE
  3. Inspect major acquisitions
  4. Analyze repair & maintenance exp accts
  5. Investigate status of PPE not in use
  6. Test depreciation expense/methods
  7. Investigate impairments of PPE
  8. Investigate retirements of PPE
  9. Examine evidence of legal ownership
  10. Review rental revenue from leases
  11. Examine lease agreements
  12. Perform analytical review procedures
  13. Evaluate F/S presentation/disclosure
41
Q

Liabilities - Accounts

A
  • Accounts Payable
  • Interest Payable
  • Salaries Payable
  • Unearned Revenue
  • Notes Payable
42
Q

Liabilities - Related Accounts

A
  • Expenses
  • Interest Expense
43
Q

Liabilities - Auditor’s Objectives

A
  • Consider Inherent Risks
  • Understand Internal Controls
  • Substantiate Existence
  • Determine Accuracy
  • Establish Completeness
  • Verify Cutoff
  • Determine Obligation
  • Presentation & Disclosures
  • Proper Valuation
44
Q

Liabilities - Internal Controls - Overall

A
  • Purchasing
  • Receiving
  • Vouchers
  • Vendors’ Statements
45
Q

Liabilities - Internal Controls - Detail

A
  • None
46
Q

Liabilities - Audit Steps

A
  • Understand Inherent Risks
  • Understand Internal Controls
  • Assess Risks of material misstatements and design further audit procedures
  • Perform further audit procedures - Tests of Controls:
  • Revise risk assessment if necessary
  • Perform other audit procedures - Substantive tests:
47
Q

Liabilities - Audit Steps - Tests of Controls

A
  • Verify posting to A/P subsidiary
  • Vouch postings to supporting doc.
  • Test IT applications
48
Q

Liabilities - Audit Steps - Substantive Tests

A
  1. Reconcile A/P subsidiary to G/L
  2. Vouch A/P balances to documents
  3. Reconcile A/P to creditor statements
  4. Confirm A/P with vendors
  5. Perform analytical procedures
  6. Search for unrecorded liabilities
  7. Identify A/P from related parties
  8. Evaluate F/S presentation/disclosure
49
Q

Debt Equity - Accounts

A
  • Bonds Payable
50
Q

Debt Equity - Related Accounts

A
  • Interest Expense
51
Q

Debt Equity - Auditor’s Objectives

A
  • Consider Inherent Risks
  • Understand Internal Controls
  • Substantiate Existence
  • Determine Accuracy
  • Establish Completeness
  • Verify Cutoff
  • Determine Obligation
  • Presentation & Disclosures
  • Proper Valuation
52
Q

Debt Equity - Internal Controls - Overall

A
  • Authorization by Board
  • Use of independent trustee
  • Interest payments
53
Q

Debt Equity - Internal Controls - Detail

A
  • None
54
Q

Debt Equity - Audit Steps

A
  • Understand Inherent Risks
  • Understand Internal Controls
  • Assess Risks of material misstatements and design further audit procedures
  • Perform further audit procedures - Tests of Controls:
  • Perform other audit procedures - Substantive tests:
55
Q

Debt Equity - Audit Steps - Tests of Controls

A
  • None
56
Q

Debt Equity - Audit Steps - Substantive Tests

A
  1. Analyze debt & related accts.
  2. Examine N/P
  3. Confirm debt
  4. Vouch borrowing/repayments
  5. Perform analytical procedures
  6. Recompute int exp, int pay, amortization of disc/prem
  7. Evaluate whether debt provisions have been met
  8. Trace authority for debt issuance with corporate minutes
  9. Review N/P after B/S date
  10. Identify N/P to related parties
  11. Send confirmation letters to learn about financing arrangements
  12. Evaluate F/S presentation/disclosure
57
Q

Capital Equity - Accounts

A
  • Capital Stock
58
Q

Capital Equity - Related Accounts

A
  • Dividends
59
Q

Capital Equity - Auditor’s Objectives

A
  • Consider Inherent Risks
  • Understand Internal Controls
  • Substantiate Existence
  • Determine Accuracy
  • Establish Completeness
  • Verify Cutoff
  • Presentation & Disclosures
  • Proper Valuation
60
Q

Capital Equity - Internal Controls - Overall

A
  • Board controls stock transactions
  • Independent registrar & Stock Transfer Agent
  • Stock Certificate Book
  • Stockholders Ledger
  • Dividends
61
Q

Capital Equity - Audit Steps

A
  • Understand Inherent Risks
  • Understand Internal Controls
  • Assess Risks of material misstatements and design further audit procedures
  • Perform further audit procedures - Tests of Controls:
  • Perform other audit procedures - Substantive tests:
62
Q

Capital Equity - Audit Steps - Tests of Controls

A
  • None
63
Q

Capital Equity - Audit Steps - Substantive Tests

A
  1. Examine articles of incorporation, bylaws, minutes
  2. Analyze capital stock accounts
  3. Account for proceeds from stock issues
  4. Confirm shares outstanding
  5. Reconcile stockholder records with G/L
  6. Determine appropriate accounting applied to stock compensation plans
  7. Determine compliance with restrictions/preferences pertaining to capital stock and disclosures are appropriate

Auditing Theory and Practice (1 decks)

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