Review the financial statements and perform analytical procedures to determine whether accounts are shown in
accordance with GAAP on the financial statements.
What is presentation and disclosure
100
Sales invoices are recalculated by accounting personnel
What is independent internal verification.
100
Journals: Acquisitions journal, Cash disbursements journal, General ledger
Accounts: Cash, Capital stock, Capital in excess of par, Retained Earnings, Dividends, Dividends Payable
What is equity/capital stock
100
Discuss with management whether there is any obsolete inventory on hand at the balance sheet date.
What is client inquiry?
100
Consider the impact of any new revenue recognition arrangements since the prior year on the current year audit.
What is risk assessment
200
Confirm accounts receivable and perform alternative procedures for confirmations not returned.
What is existence/occurence
200
Sales order credit approval cannot be performed by sales department personnel.
What is adequate segregation of duties.
200
Journals: Payroll journal, General ledger
Accounts: Cash, Accrued Payroll, Accrued Taxes, Salaries and Commissions, Payroll taxes
What is payroll and personnel
200
Compute inventory turnover ratios and compare with previous years as a test of obsolescence
What is analytical procedures
200
Confirmation of customers accounts receivable balances
What is tests of details of balances
300
Obtain last bill of lading for the period and determine that all shipments were recorded as sales
What is completeness
300
Access to the client warehouse as well as accounting system is restricted.
What is physical controls over assets and records.
Observe the warehouse personnel count finished goods inventory to determine whether they are following inventory guidelines.
What is observation.
300
Compare the allowance for doubtful as a percentage of total accounts receivable to the previous year and inquire of client management as to any significant fluctuations.
What is analytical procedures
400
Review minutes of the directors meetings, inquire of client, read contracts and agreements, and confirm with lenders any indications that accounts have been assigned, sold, or pledged.
What is rights/obligations
400
Recording of sales is supported by sales orders, shipping documents and sales invoices.
What is adequate documents and records
400
Journals: Acquisitions journal, Sales Journal, General ledger
Accounts: Cash, Inventory, Accounts Payable, Cost of Goods Sold, Inventory Obsolescence
What is inventory purchase and warehousing
400
Count a sample of finished goods products and compare quantity and description to client’s count.
What is physical examination
400
Examine evidence of monthly accounts receivable reconciliation and test accuracy.
What is tests of controls.
500
Discuss the collectibility of large, overdue accounts receivable
What is valuation
500
Sales orders exceeding the customer's credit limit are approved by the credit manager.
What is proper authorization of transactions
500
Journals: Sales journal, cash receipts journal, general ledger
Accounts: Cash, Accounts receivable, Allowance for Uncollectible accounts, Sales Sales returns, Bad Debt Expense
What is sales and collections
500
Compare finished goods quantities on client’s inventory records to quantity on physical inventory count.
What is inspection
500
Randomly select 50 shipping documents and trace to their corresponding sales invoice and their inclusion in the sales journal