what are the 4 existence procedures of a/r
- positive confirmation supplemented iwth negative confirmation
- positive confirmation for every ar over a certain age or amount threshold (significant transaction audit)
- reperforming of aging schedule
- vouching sample of a/r recorded a few days before or after fye to shipping documents (also test for cut-off) - usually 5-15 days
what are the 2 completeness procedures for ar
- 0 balance positive confirmation
- vouching sample of a/r recorded a few days before or after fye to shipping documents (also test for cut-off) - usually 5-15 days
what are the 5 valuation procedures for ar
- reperform calculation for AFDA (AF credit losses)
- Analysis by comparing current year AFDA and write offs to prior year - consider economy; if worse, afda and write offs increase
- Examine subsequent cash collections
- Inquire weather it is a related party
- Inspection of BoD meeting to identify A/R from related party
what are the 2 pcorcesses for ownership of ar
- Inspect bank confirmations, debt agreements, minutes of BoD for A/R used as security for debt (pledged) or sold A/R (factored)
- Inquire management about pledged or factored A/R
what are the 5 procedures for ar presentation
- Inspect bank confirmations, debt agreements, minutes of BoD for A/R used as security for debt (pledged) or sold A/R (factored)
- Inquire management about pledged or factored A/R
- ALL HERE BECAUSE THEY SHOULD BE IN THE NOTES
- If sold, completely removed, if pledged, must be disclosed
- Inquire whether it is a related party and it must be disclosed
Inspect BoD meetings and determine whether it is related party and it must be disclosed
what are the 2 procedures for notes receivables for existence
- Positive conf. To confirm existence of N/R
- Inspect N/R document (A/R does not have signed doc.)
what is the procedure for notes receivbale completeness
- 0 balance confirmation
what are hte 2 processes for notes receivable valaution
- Examine subsequent cash collections
- Recalculate interest received and trace it to the interest income account
what are the 2 existence procedure for sales
- Select a sample of recorded sales transactions and vouch it to supporting documents (invoices, external shipping documents, customer orders, sales order)
- Select a sample (or all) of sales recorded a few days before or after FYE and vouch them to shipping documents <- test for proper period/cut-off. Usually 5-15 days
what are the 2 procedures for completeness of sales
- Select a sample of source documents and trace to the recorded sales - use block sampling of consecutive items in number or dates etc..
- Select a sample (or all) of A/R recorded a few days before or after FYE and vouch them to shipping documents <- test for proper period
what are the 3 procedures for valuation of sales
- Obtain production data number of units produced * average sales prices - analysis to get an estimate on $ value of sales
- With analysis do comparison to prior year and industry
- Inquire management for sales to related parties
what are the 2 procedures for ownership of sales
- Inspect bank confirmations, debt agreements, minutes of BoD for A/R used as security for debt (pledged) or sold A/R (factored)
- Inquire management about pledged or factored A/R
Says every sale has A/R
what are the 3 procedures for presentation of sales (rev rec)
- Inquire management for sales to related parties that must be disclosed
- Inquire management about what revenue recognition policies they have in place
- Inspect revenue recognition policies they have in written format
what is the existence procedure for inventory
Count inventory from sheet to floor - vouching and inspection
what is the completeness procedure of invenotry
Count inventory from floor to sheet - tracing and inspection
what are hte 4 valuation procedures for inventory
- Valued at LCM
- Inquire management about application of LCM
- Reperform application of LCM
Physically inspect inventory in warehouses that is scrapped or damaged
what are the 2 rocedures of ownership in iventory
inspect bank confirmations, debt agreements, minutes of BoD for inventory used as security for debt (pledged) or on lease
Inquire management about inventory which is on consignment or used as security for debt
what are the 5 procedures of presentation for invnetory
- inquire management about application of LCM
- Reperform application of LCM
- Physically inspect inventory in warehouses that is scrapped or damaged
- Inspect bank confirmations, debt agreements, minutes of BoD for inventory used as security for debt (pledged) or sold A/R (factored)
- Inquire management about inventory which is on consignment or used as security for debt
ALL MUST BE DISCLOSED
what is teh existence procedure for cogs
Vouch to supporting document
what is the completeness procedure for cogs
Trace from cogs to documents
what are the 2 valuation procedures for cogs
- Determine if proper application of FIFO, average cost, specific identification is properly applied - accounting costing method/cost flow assumption
- Uses reperformance
- Compute various gross margin ratios and compare to industry and analyze them - analysis
what is the presentation procedure for cogs
- Cost flow assumption method must be disclosed thus all tests done for valuation are relevant
- Determine if proper application of FIFO, average cost, specific identification is properly applied - accounting costing method/cost flow assumption
Compute various gross margin ratios and compare to industry and analyze them - analysis
- Determine if proper application of FIFO, average cost, specific identification is properly applied - accounting costing method/cost flow assumption
what is the existence procedure for ap
Vouch a sample from A/P subledger to supplier statements
what are the 2 procedures of comeplteness for ap (important)
- Use confirmation to test for completeness - use negative confirmation because the responding company is incentivised to reply
Primary purpose is to confirm the lower balances, those below a certain threshold - significant transaction auditing
Confirm for older 0 bal accounts to ensure there are no new transactions that need be accounted for - Search for unrecorded liabilities - combination of several procedures - inquire management, inspection
Trying to identify if there is any liabilities that are unrecorded
