CASH
What are the primary assertions related to cash?
Existence, Cutoff, Presentation & Disclosure
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 the existence of cash?
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
What is the primary audit procedure used to test fixed assets?
Testing client prepared rollforward of fixed assets
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 most common type of accrual that we test?
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 are some factors to consider when performing payroll analytics?
Employee Mix, Headcount Change, Raises, New Payroll System, New Departments/Payroll Accounts, New Hires in a Significant Role, Timing/Cutoff of Pay Periods
Definition: Amount set by auditor, of which, the auditor seeks assurance the actual misstatement in the population does not exceed.
Tolerable Misstatement / Performance Materiality
A client has a 12/31/24 year-end. If a client wrote a check on 12/30/24, and it cleared the bank statement on 1/2/25, should it be included on the outstanding checklist?
Yes! Checks should be written before the client's fiscal year-end and clear the bank statement after the client's fiscal year-end.
What are examples of standard inquiries performed when auditing AP?
Disputed invoices, credit memos after year-end, unvouchered/uninvoiced receipts, vendor dependency, any non-entered invoices
What are potential issues/areas to look out for when testing fixed assets?
Impairment, gains and losses on sales, improper capitalization, leases, capitalization policy, capitalized interest for long-term projects
What is a client’s responsibility when using a third-party service payroll provider?
Have Complementary Entity User Controls in place
For a Test of Controls: When testing continuous/recurring controls with no deviations expected, what would be the sample size?
25
What are the risks associated with cash?
Theft of cash by employees, lapping, kiting, activity processed by the bank, but not yet recorded on the GL (or vice versa)
What are specific things to watch out for when testing invoices within the AP search?
Shipping terms, invoice date vs service/delivery date, service ranges, utilities, invoices recorded within other liability accounts (accruals)
What expense account is typically tested alongside fixed assets to determine whether assets are properly capitalized?
Repairs and maintenance expense
What support do we look at when we perform a payroll test of controls?
Timecards/approvals, Payroll Registers, I-9's/EE Files, Offer Letters, Termination Letters, Pay Rate Change Forms
Name the 4 types of sampling techniques for a test of details.
3,6,9, High Value Scoping, Attribute Sampling and Nonstatistical Sampling