...Chapter 8 Audit of the Sales and Receipts Cycle 1. Objectives 1.1 To describe the documents and records that are usually found in the sales and receipts cycle. 1.2 To state the general audit procedures for the test of internal controls of this cycle. 1.3 To mention the substantive tests used for the trade debtors. [pic] 2. Documents and Records 2.1 Customer order (客戶訂單) – a request for goods from an existing or a new customer received by sales representative or other personnel in the sales department. [pic] 2.2 Sales order (銷售訂單) – a document recording the description, quantity and/or related information of the goods and services ordered to confirm the order received. It is also used internally for credit approval and authorization for delivery of goods or services. 2.3 Shipping document/goods delivery note (送貨單) – (a) a document prepared at the time when the goods are shipped or delivered, detailing the description, the quantity shipped and other relevant data. (b) bill of lading (提單) is an example of the shipping document that is prepared by the carrier to acknowledge the receipts of goods and also serves as a notice to customer for shipment by the seller. [pic] [pic] |Basic Contact Details of Company | |To: Date: 21 June 2007 | |Goods...
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...Chapter 7 Audit of the Purchases and Payment Cycle 1. Objectives 1.1 To describe the documents and records that are usually found in the purchases and payment cycle. 1.2 To state the general audit procedures for the test of internal controls of this cycle. 1.3 To mention the substantive tests used for the trade creditors. [pic] 2. Documents and Records 2.1 Purchase requisition (請購單) – a form detailing the request for goods or services by an authorized employee of the user department and it is then passed from the user department to the purchase department. For example, order of materials by a factory/storeroom supervisor. [pic] 2.2 Purchase order (訂購單) – a document from a company to the supplier recording the description, quantity and amount of the goods or services ordered and it should be properly authorized by the company. [pic] 2.3 Goods received note (收貨單) – a document prepared by the supervisor of the storeroom/receiving department at the time the goods are received. It shows the description, quantity, condition and date of the goods received. [pic] 2.4 Purchase invoice – a document received from vendor which indicates the date, description, quantity and the total amount of goods and services the company has received. 2.5 Purchase journal and ledgers (a) A journal (day book) for recording the purchases of goods or services. (b) Vendors’ accounts in the purchase ledger will also be updated with the remittance advice/receipts...
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...Auditing Theory 1. A control which relates to all parts of the EDP system is called a(n) a. Systems control c. Applications control b. General control d. Universal control 2. Which of the following is not an output control? a. Proper authorization of transaction b. Control totals c. Check digits d. Adequate documents 3. Should the auditor feel, after obtaining an understanding of the EDP internal control structure, that control risk cannot be reduced, he or she will a. Issue a disclaimer b. Issue an adverse opinion c. Increase the sample size for tests of controls d. Expand the substantive testing portion of the audit 4. The real-time feature normally would be least useful when applied to accounting for a firm’s a. Bank-account balances b. Property and depreciation c. Customer accounts receivable d. Merchandise inventory 5. A sample in which the characteristics in the sample are the same as those of the population is a a. Random sample c. Attributes sample b. Variables sample d. Representative sample 6. Establishing a route through the random number table a. Is an arbitrary decision b. Needs to be done in advance of choosing the numbers c. Is essential and the route must be followed consistently d. Requires that all three of the above is true 7. When...
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... 1 C | 16 A | 31 D | 46 True | 2 B | 17 A | 32 D | 47 False | 3 B | 18 B | 33 A | 48 False | 4 C | 19 C | 34 B | 49 True | 5B | 20 D | 35 D | 50 False | 6 A | 21 D | 36 C | | 7 A | 22 A | 37 B | | 8 D | 23 D | 38 A | | 9 D | 24 B | 39 C | | 10 B | 25 D | 40 C | | 11 D | 26 A | 41 G | | 12 B | 27 A | 42 B | | 13 B | 28 A | 43A | | 14 B | 29 B | 44 D | | 15 C | 30 B | 45 F | | Multiple Choice Questions 1. | When an employee embezzles company funds from an electric utility company for the purpose of paying expenses of an antinuclear protest organization, the fraudster's motive is said to be A. | Psychotic. | B. | Egocentric. | C. | Ideological. | D. | Economic. | | | 2. | Which of the following management policies would increase the probability of fraud in a company? A. | Diversifying authority throughout divisions and subsidiaries in the organization. | B. | Measuring performance and awarding bonuses based on short-term operating results. | C. | Giving employees performance feedback that considers positive and constructive praise along with critical and negative observations on their work. | D. | Establishing work teams that share responsibilities, performance, and bonuses based on collective efforts. | | | 3. | Which of the following is not considered one of the three factors increasing the probability of fraud? A. | Motive. | B. | Lack of training. | C. | Opportunity...
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...Chapter 7 – Internal Controls • Key topics: • Know the broad definition of internal control and its purposes, including the objective that is particularly relevant to an audit (i.e. reliability of financial reporting) A process, effected by the entity's board of directors, management, and other personnel, designed to provide reasonable assurance regarding the achievement of objectives relating to operations (effective and efficient operations), reporting (accurate financial reporting) and compliance (compliance with laws and regulations) • Describe the 5 components of internal control, related examples of each, and how each contributes to the overall control system within an entity (CRIME) 1. Control Environment: The foundation for the other internal control components; it is defined by the standards, processes, and structures that guide individuals in carrying out their duties. Basic principles include: Commitment to integrity and ethical values, Board of directors demonstrates independence from management and exercises effective oversight of internal control, Establishment of effective structure, including reporting lines, and appropriate authorities and responsibilities, Commitment to attract, develop, and retain competent employees, and Holding employees accountable for internal control responsibilities. 2. Risk Assessment: Risk assessment is management's process for identifying, analyzing, and responding to risks from internal and external sources that threaten...
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...Chapter 12 Audit of Cash and Other Liquid Assets Review Questions: 12-1. It is important that cash and liquid asset testing be coordinated because the assets can be quickly moved and thus substituted for each other. For example, an organization could quickly move assets between cash and certificates of deposit. 12-2. General Cash Account. This is the account used to transact most of the organization's cash transactions. It is usually a high volume, but low balance account. Because of its high volume and its liquidity it is susceptible to greater risk than most asset accounts of the same size. Imprest Payroll Account. This is an account that is maintained strictly for the payment of payroll. The organization makes a deposit equal to the monthly or weekly payroll at the time the payroll checks or electronic transfers are issued. The account is used to minimize accounting costs and to isolate payroll risks to one account. 12-3. We disagree with the auditor's assessment of inherent risk of cash transactions as low. Granted, the accounting for cash and marketable securities is not overly complex. However, the liquidity of the accounts, coupled with their susceptibility to fraud or misappropriation, makes the inherent risk of the accounts at least moderate - if not high. Most organizations recognize the high inherent risk associated with the accounts and have implemented detailed control procedures to reduce control risk to a minimal level. 12-4. Cash, when well...
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...14e (Arens) Chapter 1 The Demand for Audit and Other Assurance Services Learning Objective 1-1 1) The Sarbanes-Oxley Act applies to which of the following companies? A) All companies. B) Privately held companies. C) Public companies. D) All public companies and privately held companies with assets greater than $500 million. Answer Terms: Sarbanes-Oxley Act Diff: Easy Objective: LO 1-1 AACSB: Reflective thinking skills Topic: SOX 2) Which of the following is considered audit evidence? A) Oral statements Written Auditor made by management Communications Observation Y N N B) Oral statements made by management N C) Oral statements made by management Y Written Communications Y Auditor Observation Y Written Communications Y Auditor Observation Y D) Oral statements made by management N Answer Terms: Audit evidence Diff: Moderate Objective: LO 1-1 AACSB: Reflective thinking skills Written Communications N Auditor Observation Y 3) Evidence is paramount to audit and attestation engagements. List the four basic types of audit evidence. 4) The criteria by which an auditor evaluates the information under audit may vary with the information being audited. A) True B) False Terms: Criteria which an auditor evaluates information Diff: Easy Objective: LO 1-1 AACSB: Reflective thinking skills 5) The criteria used by an external auditor to evaluate published financial statements are known as generally accepted auditing standards. A) True B) False Answer Terms: Criteria used...
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...Internal Audit Department Audit Program for Cash | | |Audit Scope: | |Audit Objectives: | |Risks | |Cash transactions may not be recorded accurately | |Cash may not exist | |Audit Procedures |Done by |Date |W/P Ref | |Confirm selected bank accounts and special arrangements | | | | | | | | | |Select bank accounts for confirmation in order to obtain a moderate to low level of | | | | |assurance that the aforementioned...
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...has provided the accompanying explanations. Please note that the AICPA generally releases questions that it does NOT intend to use again. These questions and content may or may not be representative of questions you may see on any upcoming exams. 2007 AICPA Newly Released Questions – Auditing 1. CPA-05465 Which of the following categories is included in generally accepted auditing standards? a. b. c. d. Standards of review. Standards of planning. Standards of fieldwork. Standards of evidence. ANSWER: Choice "c" is correct. Generally accepted auditing standards include three categories: general standards, standards of fieldwork, and standards of reporting. Choices "a", "b", and "d" are incorrect, based on the above explanation. 1 2007 AICPA Newly Released Questions – Auditing 2. CPA-05466 A retailing entity uses the Internet to execute and record its purchase transactions. The entity's auditor recognizes that the documentation of details of transactions will be retained for only a short period of time. To compensate for this limitation, the auditor most likely would: a. b. c. d. Compare a sample of paid vendors' invoices to the receiving records at year-end. Plan for a large measure of tolerable misstatement in substantive tests. Perform tests several times during the year, rather than only at year-end. Increase the sample of transactions to be selected for cutoff tests. ANSWER: Choice "c" is correct. When an entity transmits, processes, maintains, or accesses significant...
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...14-22 a. (4) b. (3) c. (1) d. (1) 14-23 a. (4) b. (4) c. (2) 15-11 Sampling error is an inherent part of sampling that results from testing less than the entire population. Sampling error simply means that the sample is not perfectly representative of the entire population. Nonsampling error occurs when audit tests do not uncover errors that exist in the sample. Nonsampling error can result from: 1. The auditor's failure to recognize exceptions, or 2. Inappropriate or ineffective audit procedures. There are two ways to reduce sampling risk: 1. Increase sample size. 2. Use an appropriate method of selecting sample items from the population. Careful design of audit procedures and proper supervision and review are ways to reduce nonsampling risk. 15-24 a. (4) b. (3) c. (2) 16-20 a. (4) b. (4) c. (2) 16-21 a. (4) b. (2) c. (2) 16-22 a. (2) b. (1) 16-24 a. BALANCE-RELATED AUDIT OBJECTIVE b. PREVENTIVE INTERNAL CONTROL c. TESTS OF DETAILS OF BALANCES AUDIT PROCEDURES 1. Existing accounts receivable are included in the aged trial balance (com- pleteness). The accounts receivable master file should be reconciled to the control account periodically by an independent person. Foot the aged trial balance and compare the total to the general ledger. Trace a sample of accounts from the master file to the aged trial balance to determine if all are included. 2. Accounts receivable exist (existence). The accounts receivable master file...
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...Questions 1, 2 and 3. Section B - You are required to answer any two out of Questions 4, 5, 6 and 7. (If you provide answers to more than two questions in this section, you must draw a clearly distinguishable line through the answer(s) not to be marked. Otherwise, only the first answers to hand for these four questions will be marked.) TIME ALLOWED: 3 hours, plus 10 minutes to read the paper. INSTRUCTIONS: During the reading time you may write notes on the examination paper but you may not commence writing in your answer book. Marks for each question are shown. The pass mark required is 50% in total over the whole paper. Start your answer to each question on a new page. You are reminded that candidates are expected to pay particular attention to their communication skills and care must be taken regarding the format and literacy of the solutions. The marking system will take into account the content of your answers and the extent to which answers are supported with relevant legislation, case law or examples, where appropriate. List on the cover of each answer booklet, in the space provided, the number of each question(s) attempted. The Institute of Certified Public Accountants in Ireland, 17 Harcourt Street, Dublin 2. THE INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS IN IRELAND AUDITING PROFESSIONAL 1 EXAMINATION - APRIL 2011 Time Allowed: 3 hours, plus 10 minutes to read the paper. Section A - You are required to answer Questions 1, 2 and 3. Section B - You are required to answer...
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...“A STUDY ON BANK AUDITING” BACHELOR OF COMMERCE BANKING & INSURANCE SEMESTER V (2013-14) SUBMITTED BY: ANERI SHAH ROLL NO - 88 PROJECT GUIDE: PROF. SONALI DEOGIRIKAR K.J SOMAIYA COLLEGE OF ARTS,& COMMERCE, VIDYAVIHAR (EAST), MUMBAI-400077 K.J.SOMAIYA COLLEGE OF ARTS, & COMMERCE, VIDYAVIHAR (EAST), MUMBAI – 400077 PROJECT ON: “A STUDY ON BANK AUDITING” BACHELOR OF COMMERCE (B&I) SEMISTER V (2013-2014) Submitted In Partial Fulfillment of the requirements For the Award of the Degree of Bachelor of Commerce- Banking & Insurance By Ms. ANERI SHAH ROLL NO.88 K.J.SOMAIYA COLLEGE OF ARTS, & COMMERCE, VIDYAVIHAR (EAST), MUMBAI-400077 CERTIFICATE This is to certify that Ms.ANERI SHAH of B.com. Banking & Insurance Semester V (Academic Year) 2012-2013 has successfully Completed Project on “A STUDY ON BANK AUDITING” under the guidance of PROF.SONALI DEOGIRIKAR (Mrs.SMITA DAYAL) (Dr.SUDHA VYAS) Course co-ordinator Principal INTERNAL EXAMINER EXTERNAL EXAMINER (Mrs. SONALI DEOGIRIKAR) Project Guide DECLARATION I, Ms. ANERI SHAH the student of B.com - Banking & Insurance - Semester V (2013-2014) hereby declares that I have completed Project on “A STUDY ON BANK AUDITING”. Wherever the data/information has been taken from any book or other sources have been mentioned in bibliography. The information submitted is true and original to the best of my knowledge. Student’s Signature Ms. ANERI SHAH (ROLL...
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...Test 3 Chapter 11 1. Fundamental Concepts and Characteristics of Fraud a. Evaluation of the auditor’s fraud detection responsibilities b. Treadway Committee Report findings c. Who commits fraud and why? 2. The Auditor’s Responsibility for Detecting and Reporting upon Fraud (AU 316) a. Misstatements arising from fraudulent financial reporting – Fraud for the Entity b. Misstatements arising from misappropriation of assets – Fraud against the Entity c. The overall process: i. Identify client fraud risk areas ii. Consider client anti-fraud programs and controls iii. Respond to results of the fraud risk assessment d. Responding to misstatements identified in the audit i. Effects, if due to fraud, likely immaterial ii. Effects, if due to fraud, could be material e. Detection and reporting responsibilities within the client organization – how do we respond to fraud internally f. Responsibilities for reporting fraud to outsiders – is the same criteria for reporting fraud externally as we had to do with illegal acts. g. Audit documentation responsibilities h. Typical fraud warning signs and red flags (AU 316.85) – they are arranged by 3 elements that typically exist in some kind of combination of fraud. AU 316.85 “Examples of Fraud Risk Factors. Separately presented are examples relating to the two types of...
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...Chap 1 1.23 Which of the following would be considered an assurance engagement? a. Giving an opinion on a prize promoter’s claims about the amount of sweepstakes prizes awarded in the past. b. Giving an opinion on the conformity of the financial statements of a university with generally accepted accounting principles. c. Giving an opinion on the fair presentation of a newspaper’s circulation data. d. Giving assurance about the average drive length achieved by golfers with a client’s golf balls. e. All of the above. 1.24 It is always a good idea for auditors to begin an audit with the professional skepticism characterized by the assumption that a. A potential conflict of interest always exists between the auditor and the management of the enterprise under audit. b. In audits of financial statements, the auditor acts exclusively in the capacity of an auditor. c. The professional status of the independent auditor imposes commensurate professional obligations. d. Financial statements and financial data are verifiable. 1.25 In an attestation engagement, a CPA practitioner is engaged to a. Compile a company’s financial forecast based on management’s assumptions without expressing any form of assurance. b. Prepare a written report containing a conclusion about the reliability of a management assertion. c. Prepare a tax return using information the CPA has not audited or reviewed. d. Give expert testimony in...
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...and carrier transport and goods receipt. Also as a signal Bill client. Originally sent and one or more copies reserved to the customer. b. Sales invoice is a documented description and quantity of goods sold, price, including shipping, insurance, provisions, and other relevant data. It is an indication of the method to the due date of the amount owed sales and customer payments. Originally sent and one or more copies reserved to the customer. Sales invoice is recorded record sales accounting documents. c. Credit memo document represents the number of reduction is due from the customer due to return or pocket money. Usually it takes the same general form sales invoices, but it reduces the customer's accounts receivable balance rather than increasing it. d. Remittance advice is a document, accompanied by the sales invoice to the customer, it can be returned to pay the seller. It is used to display the customer name, invoice number and amount of sales invoices, when payment is received. Remittance advice is to allow the use of direct deposit to improve the cash income of control over the managed assets. e. Monthly statement to customers is a document prepared monthly and sent to the instructions for each client accounts receivable opening balances of customers, each sales amount and date, cash payments, credit memos, and ending balance. Essentially, this is part of a customer's accounts receivable master file. 16-30 a. Tests of controls and substantive tests of transactions...
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