Audit Final Exam

Imprest account

A cash account designated for a single purpose/account and is used as a control because it usually holds 0 balance before and after use

Petty cash

A small amount of cash kept on hand for small, incidental use. Is essentially a drawer of cash which is put to miscellaneous expenses after it is used

high, due to theft

For cash, inherent risk is considered _______ as it is related to existence

Bank reconciliations

Controls over cash consist of sales, purchases, and cash disbursements controls and ____________

Less, you really only compare ending balances and reconciliations

Analytical procedures are considered to be (less // more) effective for auditing cash

Cutoff bank statements

A substantive procedure document for cash where the auditor is given a partial period bank statement for the period after year end, testing for existence/completeness alongside the confirmation

Bank confirmation

A substantive procedure document for cash which provides details of balances for each individual bank account (including loans). Is usually checked against the cutoff statement to check for existence/completeness

Bank reconciliation

A substantive procedure document for cash which checks the accounting records against the bank account, including checking for exclusion of transactions occurring after cutoff, inclusion of deposits in transit/outstanding checks, and agreement of ending balances

Proof of cash

A procedure done when there is significant risk of internal control weakness or fraud concerning cash. Includes the following process:

• Reconcile bank bb to GL bb

• Reconcile cash deposits to cash receipts journal

• Reconcile e-payments to cash disbursements journal

• Reconcile bank eb to GL eb

Kiting

A type of fraud where a transaction is recorded twice as it is transferred from one bank account to another, can be tested through a test of interbank transfers

More, valuation is more difficult

Compared to cash, investments have (less // more) inherent risk

1. Based on identical assets

2. Based on similar/comparable assets

3. Based on management judgement

How is the value of investments determined (3 methods)?

• Compare account balances to prior year

• Compare interest and dividend income to prior years

• Recalculate interest income using fv, interest rate, and period held

List 3 substantive analytical procedures for investments:

• Reconcile prior year and current year eb of PP&E and AD

• Test acquisition and disposal transactions

• Recalculate and perform analytical procedures on AD

List 3 ways you would test net PP&E:

• Rights & obligations

• Presentation & disclosure

What audit assertion would vouched by examining lease agreements for PP&E?

Valuation

What audit assertion would vouched by sampling PP&E acquisitions and vouching to invoices?

Existence

What audit assertion would vouched by sampling acquisitions and vouching to receiving reports?