Show:
Risks Assertions
Directional Risk
Common Audit Deficiencies
Over-Auditing Tendencies
100
Is it worth what the client says it's worth?
What is valuation
100
Liabilities
What is understatement
100
Cash
What is classification of deficiencies or failure to test completeness of outstanding checks listing
100
PPE
What is 1) Over-testing depreciation expense (e.g. recalculating depreciation instead of doing just a reasonableness test) 2) Extensive testing of additions and disposals – when they are not material or not considered necessary to test based on re-engineering meeting discussion
200
Has everything been included?
What is completeness
200
Assets
What is overstatement
200
PPE
What is 1) Failure to identify significant capital leases 2) Failure to consider the need to recognize losses on impaired assets 3) Failure to identify incomplete valuation of equipment constructed by the client (Construction In Process) 4) Failure to inquire about or identify assets not in use or held for sale/disposal
200
Cash
What is 1) Analyzing immaterial reconciling items when a simple inquiry or explanation from the client is sufficient. If there is a concern over reconciling items, this may be addressed in the management letter. 2) Confirming immaterial bank balances 3)Testing interbank transfers when it has not been identified as a risk, as this is an extended procedure.
300
Has it been recorded in the proper period?
What is cutoff
300
Prepaids
What is neutral
300
Debt
What is 1) Classification deficiency (current vs. non-current) 2) Overlooking violations of debt covenants 3) Miscalculating debt covenant ratios or balances 4) Failure to identify unrecorded accrued interest
300
Prepaids
What is 1) Extensive analysis of prepaid expenses when balance is not material. 2) Unnecessary recalculations of prepaid insurance. 3) Vouching immaterial prepaid expenses.
400
Did the transaction take place?
What is existence
400
A for profit's revenue and expenses
What is overstatement of revenue and understatement of expenses
400
Accrued Liabilities
What is 1) Failure to tie out the accrued payroll 2) Failure to test the maximum hours of PTO based on their employee handbook guidelines
400
Expenses
What is testing items on an account level when it should be on a sub-group level (should be discussed during planning meeting)
500
Is it in the right place on the financial statements?
What is accuracy & classification
500
A non-profit's contributions
What is overstatement or understatement (depends on client)
500
Expenses
What is 1) Not going through each step (scoping, expectations, abnormal credit balance, going to zero) and identifying what should be tested
500
Accrued Payroll
What is testing/inquiring about differences over 1-3% (based on judgment but normally pass on testing if under 3%)