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Final Exam Flashcards

0
Q

What are the Auditor’s Objectives for Cash?

A 
Consider inherent risks
Understand internal controls
Existence
Completeness
Accuracy
Cutoff
Presentation
Rights
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1
Q

What accounts are under cash?

A

Checking
Savings
Petty Cash
Short Term Investments

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2
Q

What are Auditor’s Objectives for Investments?

A 
Consider inherent risks
Understand internal controls
Existence
Completeness
Accuracy
Cutoff
Presentation
Rights
Valuation
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3
Q

What are Auditor’s Objectives for Receivables?

A 
Consider inherent risks
Understand internal controls
Existence
Completeness
Accuracy
Cutoff
Presentation
Rights
Valuation
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4
Q

What are Auditor’s Objectives for Inventories?

A 
Consider inherent risks
Understand internal controls
Existence
Completeness
Accuracy
Cutoff
Presentation
Rights
Valuation
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5
Q

What are Auditor’s Objectives for PPE?

A 
Consider inherent risks
Understand internal controls
Existence
Completeness
Accuracy
Cutoff
Presentation
Rights
Valuation
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6
Q

What are Auditor’s Objectives of Liabilities?

A 
Consider inherent risks
Understand internal controls
Existence
Completeness
Accuracy
Cutoff
Presentation
Obligation
Valuation
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7
Q

What are Auditor’s Objectives of Debt Equity?

A 
Consider inherent risks
Understand internal controls
Existence
Completeness
Accuracy
Cutoff
Presentation
Obligation
Valuation
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8
Q

What are Auditor’s Objectives of Capital Equity?

A 
Consider inherent risks
Understand internal controls
Existence
Completeness
Accuracy
Cutoff
Presentation
Valuation
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9
Q

What account is under investments?

A

Long Term Investments

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10
Q

What are some related accounts to investments?

A

Interest Income

Dividend Income

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11
Q

What are some overall internal controls of Cash?

A 
Received Cash
Recorded Cash
Deposit Cash Timely
Disbursements Authorized
Disbursements Recorded
Adequate Cash Balances
Cash Forecasts Reasonable
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12
Q

What are some overall internal controls of Investments?

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

What are internal control details of cash?

A 
More than one person involved
Separate cash handling and recording
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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14
Q

What are the audit steps of all categories?

A

A: Understand inherent risk
B: Understand internal controls
C: Asses risk of material misstatements and design further audit procedures
D: Perform further audit procedures: tests of controls
E: Perform further audit procedures: subtantive tests

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15
Q

What are tests of controls for cash?

A

Test accounting records and reconciliations
Cash receipts test
Cash disbursements test

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16
Q

What are substantive tests for cash?

A

1: Obtain analysis of cash balances and reconcile to G/L
2: Bank Confirmations
3: Review/prepare bank reconciliation as of balance sheet date
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 first week of following year
8: Investigate related party transactions
9: Evaluate F/S presentation/disclosure

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17
Q

What are tests of controls for investments?

A

Trace transactions through system
Review/test reports of investment activity
Inspect internal auditor inspection reports
Inspect monthly reports on investments
Revise risk assessment if needed

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18
Q

What are substantive tests for investments?

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 managements intent regarding derivatives/hedging
9: Evaluate accounting method
10: Test valuation
11: Evaluate F/S presentation/disclosure

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19
Q

What are accounts of receivables?

A

Accounts Receivable
Notes Receivable
Interest Receivable

20
Q

What are related accounts of receivables?

A

Sales
Sales A/R
Sales Discounts
Interest Income

21
Q

What is the account of inventories?

22
Q

What is the related account to inventories?

A

Cost of Goods Sold

23
Q

What are the overall internal controls of receivables?

A 
Segregation of duties
Credit policies
Customer's orders
Issuing merchandise
Shipping 
Billing
Collections of A/R
Adjustments to sales A/R
24
What are the overall internal controls of inventories?
Commitment to competence Integrity and ethical values Organization structure
25
What are the internal controls details of receivables?
Notes reviewed/authorized | Write-Off of notes approved
26
What are the internal controls details of inventories?
``` Purchasing Receiving Storing Issuing Production ```
27
What are tests of controls of receivables?
``` 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 Revise risk assessment if needed ```
28
What are tests of controls of inventories?
Examine purchases | Test cost accounting system
29
What are substantive tests for receivables?
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 review 7: Review year end sales contracts 8: Verify interest income & receivable 9: Evaluate accounting methods 10: Evaluate accounting estimates 11: Determine adequacy of allowance for D/A 12: Ascertain whether any A/R pledged 13: Investigate related party receivables 14: Evaluate unusual/significant sales 15: Evaluate F/S presentation/disclosure
30
What are substantive tests for inventories?
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
31
What accounts are under PPE?
``` Land Land improvements Buildings Equipment Accumulated depreciation ```
32
What accounts are related to PPE?
Depreciation Expense | Repairs/Maintenance Expense
33
What accounts are under liabilities?
``` Accounts Payable Interest Payable Salaries Payable Unearned Revenue Notes Payable ```
34
What are the related accounts for liablities?
Expenses | Interest Expense
35
What are the overall internal controls of PPE?
``` Subsidiary ledger Authorizations/work orders Variances authorized/actual costs Policy for capitalizing vs expensing All purchases through purchasing dept Physical inventories Retirement procedures ```
36
What are the overall internal controls of liabilities?
Purchasing Receiving Vouchers Vendor's statements
37
What are tests of controls of liabilities?
Verify posting to A/P subsidiary Vouch postings to supporting doc Test IT applications
38
What are substantive tests for PPE?
1: Reconcile summary of changes to G/L 2: Vouch addition to PPE 3: Inspect major acquisitions 4: Analyze repair and maintenance expense 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
39
What are substantive tests for liabilities?
1: Reconcile A/P to G/L 2: Vouch A/P balances to docs 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
40
What account is under debt equity?
Bonds Payable
41
What is the related account to debt equity?
Interest expense
42
What are the internal controls for debt equity?
Authorization by board Use of independent trustee Interest payments
43
What is the account for capital equity?
Capital Stock
44
What is the related account of capital equity?
Dividends
45
What are the overall internal controls of capital equity?
``` Board controls stock transactions Independent registrar and stock transfer agent Stock certificate book Stockholders ledger Dividends ```
46
What are substantive tests for debt equity?
1: Analyze debt and related accounts 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 mins 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
47
What are substantive tests for capital equity?
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's 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 1 (2 decks)

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