Topic 1
Across all engagement teams, this always considered a significant risk.
What is Management Override?
Assertion that is related to the risk that the journal entry is recorded in the wrong period.
What is cut-off?
In identifying significant disclosures and their relevant assertions, do we consider the same factors that we would in determining significant account balances?
Yes
Additional controls you need to consider when the disclosure is composed by simply pulling and summarizing relevant data from the G/L.
Controls over extraction of the data from the G/L and the preparation of the disclosure itself.
These specialist generally help the engagement team with the JE applications
IT Specialist
These are usually reoccurring entry's.
What is Automated Entries?
Assertion that is covered by the following control: Searching for omitted routine entries.
What is Completeness?
We should evaluate the BLANK and BLANK risk factors related to the financial statement line items and disclosures.
qualitative and quantitative
The most commonly used tool to ensure compliance with reporting standards in financial statement disclosures.
GAAP Checklist
The best way to understand the journal entry process is
Performing Walkthroughs
This assertion is related to recording an entry in the wrong period.
What is cut-off?
Step following the evaluation and test of the design of the relevant controls over journal entries.
What is testing the Operating Effectiveness of the controls over JE's?
Name 3 examples of risk factors relevant to the identification of significant accounts and disclosers
Size and composition of the account;
Susceptibility to misstatement due to errors or fraud;
Volume of activity, complexity, and homogeneity of the individual transactions processed through the account or reflected in the disclosure;
Nature of the account or disclosure;
Accounting and reporting complexities associated with the account or disclosure;
Exposure to losses in the account;
Possibility of significant contingent liabilities arising from the activities reflected in the account or disclosure;
Existence of related party transactions in the account; and
Changes from the prior period in account or disclosure characteristics.
When is it appropriate that our documentation clearly distinguishes our tests of controls from our substantive procedures?
Dual-purpose testing
What are three of the five assertions related to journal entry's
Occurrence, Cutoff, Accuracy, Completeness, Classification
Name two types of journal entries.
What are topside, nonstandard, standard or automated?
What are some things we would consider when controls over journal entries are concluded to be ineffective, we consider the impact on the audit of the financial statements.
Changing Nature, Timing, and Extent for our substantive procedures. Evaluate the deficiency related to the opinion
Name the assertion: Disclosed events, transactions, and other matters have occurred and pertain to the entity
Occurrence & Rights and Obligations
What are the 2 ways of documenting the ROMM and related controls for significant disclosures.
A single ROMM exists specifically for all disclosures, or the disclosures are addressed separately in each ROMM for the piece that the disclosure relates to.
Name one of three of the likely sources of misstatement.
Identify the risks of material misstatement;
Identify the relevant controls that address such risks and
Test the design and operating effectiveness of such controls as we would for controls that relate to significant account balances.
How we address the RoMM depends on this.
What is Level of Aggregation?
Name an example of an automated and manual control as they relate to JE's
Manual: Approving JE's
Automated: IT system allowing access to post
Name the Assertion: Financial information is appropriately presented and described, and disclosures are clearly expressed
Classification and Understandability
Management checks for _____ and ______ when looking at financial disclosures (assertions).
Completeness and accuracy
When are significant disclosures not applicable?
When the account is immaterial to the financial statements.