CASH
What is the primary assertion related to cash?
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 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
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
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
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 the outstanding checklist?
By testing cutoff of subsequent activity from the bank statement
What are examples of standard inquiries performed when auditing AP?
Disputed invoices, credit memos issued after year-end, unvouchered/uninvoiced receipts, economic dependency
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 provider?
Have Complementary Entity User Controls in place
Definition: The rate of deviation within the sample the auditor is willing to accept.
Tolerable Rate of Deviation
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
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
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