Assertions
The following definition relates to which assertion?
"The assets, equity balances, and the liabilities that were supposed to be recorded have been recognized in the financial statements"
Completeness
Typically, the risk with liabilities are that they are (a) overstated (b) understated?
Understated
Which procedures are typically performed on material Cash balances?
Bank Reconciliation
Cash Confirmation
Subsequent Statement Search for any material or unusual transactions
A trend consist of at least what amount of year(s) of data in analytical procedures?
3+
"The concept of determining the importance / significance of an amount, transaction, or discrepancy" is called what?
Materiality
"Transactions have been recognized in the correct and relevant accounting periods" relates to which assertion?
Cut-off
When sampling accounts receivable and confirming, what is the risk we are addressing?
Testing for existence / overstatement of A/R.
Typically, in order to test the completeness of Accounts Payable, KR will perform what test?
Subsequent Disbursement Test / Search for Unrecorded Liabilities
Typical ratios performed on Accounts Receivable and Inventory include?
Days sales in inventory
Inventory turnover ratio
Days sales in AR
AR turnover ratio
How do we typically test revenue for a real estate client?
Rent Roll & Rent Reasonableness
When we do an inventory observation, and we perform floor to sheet selections, what assertion is this covering?
Completeness
When performing an NRV test, what is the risk associated with inventory?
Overstatement of inventory - Valuation, inventory is worth less than the historical cost and must be written down to its net realizable value
Analytical Procedures covers which assertion(s)?
All assertions
Typically, what analytical procedure is performed in relation to the fixed asset roll forward?
Depreciation Expense analytic over total PPE (depreciable assets)
When performing a payroll reconciliation, what must be deducted and added back in order for GL balances to reconcile with 3rd party payroll report?
PY/CY payroll related accruals
Rights and Obligations is an assertion pertaining to P&L, B/S, or Presentation and Disclosure?
Balance Sheet
A search for unrecorded liabilities addresses which risk?
The risk of liabilities being understated
- Completeness and Cutoff
A bank reconciliation workpaper is an example of which audit procedure?
Reperformance
Name 3 examples of analytics performed on revenue?
-Sales YoY
-GM % YoY
-Sales by product categories
-Sales by month
-Sales by location
When performing a search for unrecorded liabilities, how do we test the completeness of the subsequent disbursement register?
By making sure all disbursements above scope on the bank statement are included in the disbursement register.
If we are concerned that net realizable value of inventory is less than the cost, we typically would perform an inventory NRV test. This test will help with which assertion?
Valuation
If a company is attempting to pay less in taxes, what is the risk with regards to expenses?
Occurrence - The company is overstating / including personal expenses that don't belong to the company for tax benefits
Classification - The company is expensing assets that should be capitalized. (ex. prepaid insurance, fixed assets).
Which procedure would we perform in order to validate that the accounting system is properly calculating the average cost of inventory?
Recalculation
Which analytic compares CY to PY balances and investigates any significant/unexpected balances/variations. Inquires with client for reasonableness and request support if not reasonable per your judgment.
Expense Flux
On a fixed asset roll forward, what audit procedure is performed in order to insure the PY balance + CY additions - CY disposals is correct?
Recalculation