Flashcards in Deck 14 Deck (19):
Segregation of duties related to the payroll cycle
Authorization to employ and pay; supervision; timekeeping and cost accounting; payroll check preparation
Financing cycle includes:
Entity's debt and equity
Biggest concern (assertion) dealing with transactions:
In evaluating the reasonableness of an estimate, an auditor would normally concentrate on key factors and assumptions that are:
1. Significant to the accounting estimate
2. Sensitive to variations
3. Deviations from historical patterns
4. Subjective and susceptible to misstatements and bias
What would assist an auditor in identifying related party transactions?
Reviewing accounting records for nonrecurring transactions recognized near the balance sheet date
In evaluating the reasonableness of an estimate, the auditor may perform one or a combination of the following procedures:
Review and test management's procedures, develop an independent estimate for comparative purposes, or review subsequent events and transactions (occurring prior to the completion of fieldwork) for corroborative purposes.
Subjective number that is being generated by management
How do you test fair value measurements and disclosures?
Determine whether management's significant assumptions provide a reasonable basis for fair value measurements
The auditor should accumulate misstatements identified during the audit, other than those that are:
Matters that are not important or significant, both individually and in aggregate, and when judged by any criteria of size, nature, or circumstance
Who performs the engagement quality of review?
A partner who is not otherwise associated with the engagement
Primary internal control planning objectives of an auditor in a financial statement audit:
- Identify types of potential material misstatements
- Consider factors that affect the risk of material misstatements.
- Design effective substantive tests
If the auditor plans to rely on controls that have changed since they were last tested, the auditor should:
Test the operating effectiveness of such controls in the current audit.
Gross profit percentage
Gross profit/sales revenue
Accounts receivable turnover
Net credit sales/Average accounts receivable
Common Size financial statements
Used to compare a company's performance with the performance of other smaller or larger companies, or with its own performance over time.
Measures of how effectively an enterprise is using its assets