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48 Cards in this Set
- Front
- Back
Assertions of interest for Cash / Bank balance (3) |
1. Existence 2. Completeness 3. Valuation & Allocation (if foreign currency balances) |
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Assertions of interest for cash receipts / payments (3) |
1. Occurrence 2. Completeness 3. Accuracy (if foreign currency transactions) |
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Tests for existence of cash / bank balance (2) |
Request and examine bank confirmation Undertake tests of bank reconciliations |
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Tests for Completeness of cash / bank balance |
Request and examine bank confirmation Undertake tests of bank reconciliations |
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Test for Rights & Obligations of cash / bank balance |
Request and examine bank confirmation |
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Test for Valuation of cash / bank balance (2) |
Request and examine bank confirmation Test conversion rates for any foreign currency balances |
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Test for occurrence of cash / bank transactions |
Inspect supporting documentation |
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Test for accuracy of cash / bank transactions |
Inspect supporting documentation
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Test for Completeness of cash / bank transactions |
Undertake sequence check (remittance advices & cheques) |
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Test for cut-off of cash / bank receipts |
Check last cash receipts and cash payment before bal date and first cash receipts and cash payments aft bal date are recorded in correct period. |
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Test for occurrence of sales transactions |
Vouch sales entries in sales journals to supporting documentation of sale Verify prices, quantity and computation on sales invoices, prices verified to master price list, quantity verified to shipping documentation |
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Test for completeness of sales transactions |
Test from supporting documentation (invoice, delivery note) to sales journal |
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Test for accuracy of sales transactions (2) |
Test from supporting documentation (invoice, delivery note) to sales journal Verify prices, quantity and computation on sales invoices -- prices verified to master price list, quantity verified to shipping documentation |
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Test for cut-off of sales transactions (3) |
Review shipping docs at year end to ensure sale is recorded in correct period Check last sales recorded before and after bal date Check invoices recorded before and aft year date |
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Test for Existence of accounts receivable (2) |
Undertake debtor's confirmation procedures Review subsequent receipts |
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Test for Rights of accounts receivable (2) |
Undertake debtors' confirmation procedures Review minutes & contracts for evidence of pledging of receivables, factoring or other liens |
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Test for completeness of accounts receivable (2) |
Review subsequent receipts *Review minutes & contracts for evidence of pledging of receivables, factoring or other liens (to some extent) |
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Test for Valuation of accounts receivable (3) |
Review subsequent receipts Review aged trial bal and undertake follow-up procedures for amts overdue Test conversion rates for any foreigh currency accounts rec |
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Describe the positive form of external confirmation procedures |
Once debtor has been selected, auditor must obtain evidence and ask debtor whether they agree with amt owed. If they do not respond: - follow-up procedures e.g. 2nd request - or check invoices to shipping docs, review subseq receipts from that debtor If they respond with a difference - check if timing diff - check if there is an error by reviewing supporting doc - check if due to disc, good returned, or special terms of sale |
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Describe negative form of external confirmation procedures (3) |
Requests debtor to respond only if they disagree with amount shown However, problem if cust doesn't exist - auditor under false presumption that cust is correct Use if large sample, material clients |
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Why does inventory receive considerable audit attention? (4) |
1. Significant in the determination of income 2. Involves high volume of activity 3. Involves acctg complexities (obsolete / slow-moving items, lower of cost / net realisable value) 4. Susceptible to manipulation |
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Test for occurrence of purchase transactions (2) |
Review for any unmatched receiving reports & suppliers' invoices Select transactions from purchases journal & agree to supporting documentation |
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Test for completeness of purchase transactions (2) |
Review for any unmatched receiving reports and suppliers' invoices Test from supporting documentation (purch invoice, good received note) to purch journal |
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Test for accuracy of purchase transactions |
Check dollar value of purchases to support documentation (purch invoice) |
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Test for cut-off of purchase transactions (2) |
Check that last purchases recorded before bal date and consider when received by evidence of goods received note Check that last purchases recorded before bal date and first purchases recorded aft bal date |
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Test for Existence of inventory (3) |
Inspect physical inventory (check from inventory records to physical stock) Undertake substantive analytical prcoedures Confirm stock held at other locations |
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Test for completeness of inventory (5) |
Undertake substantive analytical procedures Inspect physical inventory (check from physical stock to inventory records) Enquire abt legal ownership of goods being shipped to entity by inspecting supporting documentation Review purchase docs for shipping terms for inventory in transit Confirm stock held at other locations |
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Test for valuation of inventory (4) |
Undertake substantive analytical procedures Undertake tests of pricing Observe physical inventory Scan inventory records to id any obsolete, excess or slow-moving inventory Check subsequent sales prices and compare with inventory valuation Review and ensure that costs assigned to inventory are in accordance with an acceptable accounting method |
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Test for rights of inventory |
Enquire about legal ownership of goods being shipped to entity and on consignment by inspecting supporting documentation |
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Test for completeness of accounts payable (4) |
Confirm with suppliers Review of subsequent payments Review for any unmatched receiving reports & suppliers' invoices Undertake substantive analytical procedures |
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Test for existence of accounts payable (2) |
Confirm with suppliers Vouch to supporting documentation (e.g. suppliers' invoices & mthly statements) |
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Test for obligations of accounts payable (2) |
Confirm with suppliers Vouch to supporting documentation (e.g. suppliers' invoices and mthly statements) |
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Test for Valuation of accounts payable (3) |
Confirm with suppliers Agree $ value of accs payable to supporting docs (e.g. suppliers' invoices) Undertake substantive analytical procedures |
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What is the most likely form of misstatement in accounts payable, and which assertion is of most concern? |
Understatement Completeness |
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Describe the procedure 'review of subsequent payments (2) |
Auditor selects fr cash payments recorded in subsequent period & traces them to sched of accts pay outstanding at bal date, identifying payments that pertain to period under audit Also reviews & selects fr unmatched inventory receiving reports & suppliers' invoices received by bal date & suppliers' invoices recorded in subseq period |
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Test for completeness of payroll (2) |
Test from supporting documentation (time sheets, dept records) to payroll journal Review for unmatched reports & staff records |
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Test for occurrence of payroll (2) |
Select transactions from payroll listing and agree to supporting documentation (e.g. time sheet) Review for unmatched reports & staff records |
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Test for cut-off of payroll |
Check that last payroll recorded before bal date, and first payroll recs aft bal date, are recorded in correct period |
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Test for accuracy of payroll |
Verify times, amounts and computation on time sheets to payroll & employment records |
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Test for completeness of accruals |
Review client calculation & ensure correct no of days of wages & salaries worked during year but not paid by year end correctly counted |
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Testing of Non-current assets |
Balances usually affected by a few relatively large transactions each year Usually efficient for auditors to verify acc bal by performing tests on indiv transactions Assertions: existence, r&o, valuation & allocation |
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Key procedures for PPE (4) |
Vouching: inspecting the supporting docs
for additions, retirements and changes in valuation / allocation methods during the period Physical examination Substantive analytical procedures Recalculating related expense accounts such as depreciation |
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3 principal ways of finding evidence of impairment |
Observing obsolete, damaged, or under-utilised units during tour of plant Identifying assets associated with discontinued activities but not yet disposed of Enquiry of mgmt as to budgets & forecasts in relation to carrying value of assets |
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Revaluing PPE (5) |
Evaluating data on which est is made by mgmt Testing mgmt's underlying data Testing calculation procedures used Comparing acctg ests made in prior periods Making / obtaining independent estimate to compare with appropriateness of mgmt's est |
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Investment assertions (2) |
Valuation Existence |
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Common procedures to test for investments (5) |
Physically examine documentation Seek external confirmation Review minutes of meetings Inspect mkt quotations Test clerical accuracy |
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Assertions for intangible assets (2+ 1) |
Existence Valuation *Auditors may consider use of experts |
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Assertion for Non-current liabilities and owners' equity & procedures (1+4) |
Completeness Key procedures: - External confirmations - banks - Substantive analytical procedures - Recalculating & vouching - Read minutes of meetings, review debt agreements and inspect share register / confirm with share registry |