CASH
What is the most relevant assertion for the cash section?
Existence
What are the primary assertions related to AP?
Completeness & Cutoff
What are the primary assertions related to fixed assets?
Existence & Valuation
What are the primary assertions related to payroll?
Cutoff & Existence
What are the 3 levels of assurance that can be obtained from substantive analytical procedures?
Low, Medium, and High
What is the best way to test existence of cash?
External Confirmations
What is the directional risk associated with AP?
Risk of Understatement
What do we typically look for when testing fixed asset additions?
Properly capitalized, properly recorded, existence, properly approved, proper useful life, proper depreciation calculation
What is the main substantive procedure over payroll?
Payroll Reconciliation
Sampling technique whereby the auditor sorts the population based on the account balance and then selects items for testing in descending order until a certain monetary amount of coverage has been achieved.
High Value Scoping
What evidence do we obtain to substantively test cash?
Bank statements, reconciliations, external confirmations
What is the main substantive test of details that is used to address the major risk in auditing AP?
AP Search for Unrecorded Liabilities
The client has expensed a $6,500 repair while they historically have capitalized anything greater than $5,000. What do we do?
First step is to discuss with the client and get an explanation. Once discussed with client, talk amongst the team on next steps
Identify one internal control process that you feel is important to a payroll cycle.
Many options: timecards are approved; wages are approved by supervisor; payroll changes are approved; payroll expenses are reviewed by management (budget to actual); periodic payroll runs are reviewed/approved before and after processing.
Definition: Amount set by auditor, of which, the auditor seeks assurance the actual misstatement in the population does not exceed.
Performance Materiality
How do we test cutoff of cash?
By testing the outstanding checklist.
Where in CaseWare can you find information to help with completing a non-stat (significant risks, reliance on controls, analytics, etc. (workpaper number or name)?
WP 3300 – Significant Accounts and Risk Assessment
You have received the client-prepared roll forward of fixed assets as well as the year-end fixed asset detail: prior to filling out the sampling form and making selections, what is the first step you should do?
Test the schedules for accuracy and completeness - Tie out balances to PY workpapers, detail of fixed assets and tie to General Ledger
What is a client’s responsibility when using a third-party service provider?
Have Complementary Entity User Controls in place
Where could you find a sampling form in CaseWare?
Document Library in CaseWare
What are the risks associated with cash?
Theft of cash by employees, lapping, kiting, deposit processed by the bank, but not yet recorded on the GL
If we have a selection with a cash disbursement made on 1/4/2024, but the services were performed prior to 12/31/2023, should this be accrued for? If yes, where would you check?
Accrued for, AP Detail (or other accrued expenses)
True or False? The prior year and current year fixed asset balances are equal, therefore no testwork needs to be completed on fixed assets, despite being deemed a significant account at WP 3300 (SARA form).
False. We will still need to test the rollforward for any current year activity (additions, disposals, CIP).
Why would we perform a payroll test of control on an audit engagement?
Reduce substantive procedures; To leverage for 401k audit
Name the 4 types of sampling techniques.
3,6,9, High Value Scoping, Attribute Sampling and Nonstatistical sampling