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Flashcards in Deck 20 Deck (4)
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1

cash and Cash equivalents

- Obtain a summary schedule of all cash and cash equivalent accounts. Icon indicating you answered this question correctly Agree each account balance to the Trial Balance. Foot/recalculate all totals on the summary schedule. Tie the schedule total to the Financial Statements.

- Confirm cash balances with banks for all accounts open at any point during 20X6. Agree amounts to the bank statements. Investigate any discrepancies. Note any restrictions on balances.

- Examine bank reconciliations. Agree amounts to cash confirmations. Trace ending totals on bank reconciliations to Trial Balance. Investigate significant reconciling items.

-Examine bank cutoff statements. Icon indicating you answered this question correctly Agree amounts to bank statements and bank reconciliations.

- Observe cash and cash equivalents on hand at 12/31/20X6. Tie amounts to the Trial Balance.

- Inquire of management as to the existence of compensating balances and their associated restrictions and requirements.

-Obtain and examine bank transfer schedule. Agree amounts to bank statements. Investigate any discrepancies.

2

Prepaid expenses

- Obtain a summary schedule of all Prepaid expense accounts. Agree each account balance to the Trial Balance. Foot/recalculate all totals on the summary schedule. Tie the schedule total to the Financial Statements.

- Perform a fluctuation analysis of prepaid expense accounts. Investigate significant changes.

- Obtain detailed listing of prepaid insurance policies, including coverage period, premium amount, monthly amortization amount, and ending balances. Recalculate prepaid insurance and insurance expense amounts. Tie ending balances to the Trial Balance.

- Vouch significant increases/additions to premium notices and invoices

3

A/R

- Obtain a summary schedule of all Accounts receivable accounts. Agree each account balance to the Trial Balance. Foot/recalculate all totals on the summary schedule. Tie the schedule total to the Financial Statements.

-Confirm 100% of individually material receivables and a sample of the remaining balances. Investigate any discrepancies.

- Examine allowance for doubtful accounts for reasonableness and consistency. Recalculate allowance to ensure company policy is being followed. Investigate/document any digressions from policy. Examine A/R aging to determine adequacy of allowance.

- Trace receivables greater than materiality threshold to subsequent cash collections in 20X7.

- Vouch new accounts receivable to original sales transaction documents. Investigate any discrepancies.

- Inquire about pledging, discounting, and factoring of balances.

- Review cutoff of sales, sales returns, and cash receipts.

-Perform analytical procedures on Accounts receivable and Allowances for doubtful accounts to evaluate reasonableness of balances and to understand account trends.

4

Notes Receivable

- Obtain a summary schedule of all Notes Receivable accounts. Agree each account balance to the Trial Balance. Foot/recalculate all totals on the summary schedule. Tie the schedule total to the Financial Statements.

- Confirm year-end balances. Investigate any discrepancies.

-Inquire about pledging, discounting, and factoring of balances.

- Trace Notes Receivable > $10,600 to subsequent cash collections in 20X7.5% of net income for 20X6 would be $10,600. T

- Examine allowance for doubtful accounts for reasonableness and consistency. Recalculate allowance to ensure company policy is being followed. Investigate/document any digressions from policy. Examine N/R aging to determine adequacy of allowance.

-Review new loan agreements.

- Inquire about loans to management and other related parties, especially those with unique terms. Determine the business purpose of the transaction and verify that it was approved by the Board of Directors. Evaluate whether any notes require disclosure.