Bus425 spring05 Auditing

Bus425 spring05 Auditing - BUS 425 Auditing Tad Miller 1...

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Unformatted text preview: BUS 425 Auditing Tad Miller 1 1/141'05 \b‘ Engagement Planning, Internal Control Evaluation and the Audit of Cash '1. CLIENTACCEPTANCE With regard to a new client such as Cable Co, we have pretty much sketched out the engagement team. With whom in their firm does Putnam Rhodes & [j Schaefer need to be concerned regarding independence. You don‘t need to list names but rather list people by position in the firm and/or role on the engagement who will be considered covered members. a pmes m the, 096% ‘0‘? m engagement, 0 0.“ members m w sham 0? CthW1 9 all Wars 0% "WW. englZ-rm rd: _ 0 pm ‘5 WWW .pmmdcitt / com/LIL [1‘7 'Wk) r) W [3 A? 2. FIRST SrnNDARD 0F FIELD WORK State the first standard of field work. 0!} Wonk Must be adfgum‘r/j plat-mat and e, fi$$r€l71fi+i n" and], MUer 19-42. propel/[j dupe/awed 3. COMMUNICA HON WITH PREDECESSORAUDHUR What three points do auditing standards require the predecessor and successor auditor to discuss? ”‘ bredgreements ovate. éAA‘a a 6—H? Mimth / ranWwVMVdcthSl/lf/Wé - \\\r: \dléhr'ud (Md “3 I a i m when a\ cordvol rem ~— Qeoewi fix on mgr m ametsz I: RELATED PARTIES Describe or define what a related party is in an audit context, I (fl , W16 Afiqavf 0t Stgmhcamf IVHC/MEHCE on 0mg ‘“ Moll/kujlaswthn is booed on brawls Ems“ J WQlLS Qt? \\('\C_‘t‘t 0 é SK} flu '/ ' [w ~ . .1 can do: a? .ij’fihOklff g. game OW, g, [WYKL yaém‘w 96W 6‘ w .«jlflecsnsim‘ic A. "fi‘f'f‘ T\<3,5I( 4‘ 5h.) ( JV "k-w ‘“ ‘v’finf -- \ ‘1" Mm 5. ANAL YTICAL PROCEDURES Wire Co. had sales of $1,500,000 in 2004. Overall industry sales are up 5% in 2005 compared to 2004. On 3/3if05. Wire Co. acquired a small company that had $200,000 sales in 2004. in forming your expectations, what would you expect Wire Co‘s 2005 sales to be. SMSOOEOO x lots: 330615000 -SO\\9.$ m2003 K, SQODQOO X 0‘76 i‘flfflfbm ' ‘t‘mwcsl‘ttti‘mm L’j X : SWUS In 106% l$\\132)gg\ojx 6. I SARBANES OXLEY The major requirements of the Sarbanes—Oxley Act of 2002 cover four different groups. List the four parties covered by the Act. _ _. PHWM ha 6. Corrrtpasr‘tdxs " ?ub\i c383 Net) c\ meme " Lmuestoes '" Hmmcabwwm—‘r 7. SECOND STANDARD OF FIELD WORK State the second standard of field work. A 5099ch omdersdmndmg oi the Wrth % Hrs letewxment‘ \0 chem rte Wham CENWQ procedures ‘03 3W“ \06. dammed “to 061656 "We W"? 09 W Mealtime a? .’§\V\0~Y\C\0t\ ointth dw- €YVOV or" {You . 0606 40 cleeij *WKQ. WWW, Q‘chn)‘ 3( ’VWWN. “Oil ’lllfifihfllfi (30ml; “Qt/Doc Auras 8. SARBANES OXLEY As a result 0 Sarbanes Oxley, the PCAOB establishes specific reporting requirements for management regarding the company‘s internal control structure. Specifically, the company’s annual report must include the following three statements pertaining to internal controls. 53 ’Hana emcnl is responoMe a hit eei’ztlalidmvtg % m \n’mmmg ' \nicwnal denim s *mev Used he evaluating wittan \ ,, N ahgggm, 065€SWWWC I); 3 \ 01? m NEW/Vial Owl/Nob fl // ‘ ' ' he effectiveness, 9 SARBANES OXLEY What framework Wlii most companies use to evaluator of their internal controls? C 080 _ 0’6 Aponsom/g g Oégmmjaf/UM 10. CONTROL RISK What is the definition of control risk The probabi‘m JWCV 0\ Oamoam‘cs mkmgi C; cor/W135 Um“ {Am 5:0 preth w’ dcic 6+ WWW-i0“ W\\56Wmev\t8 momma” 0m slur/dd WM "HM ombuan sysfim 11. INTERNAL CONTROL How does the committee of sponsoring organizations define internal control A process G'prdfci bx! Mex/1W9 .%mrd D‘F l MW, a WW” OMS/awed 7‘0 '9 WWW @5ka assura'mégg 0F W dcfhwufifi O 10 Wfiflowm thwfloijeehgw /fl,mn(/d/ W713 W ‘3‘ EffiCLCflCL, of opagzt-hw ’ WW ‘ 12. COMPONENTS OFINTERNAL ONT 0L istt e five components ofmtemal co trol. ° (m’h‘D’ (gill/i non W m r a ’2 [614 AS§€SSmemf “(EDI/Hm! flotadum " l M) ‘i Cox‘s/Imam EUI hm ’ Hombre I iu cj f/ l3. 14. 15. 16. CONTROL PROCEDURES List the four examples of control procedures. SEGREGA ’IION OFDUTIES with regard to segregation of duties. what four fimctionai responsibilities should be performed by different people a Authoeimd'i'em Us Tmnsamhem .r a Q6 cording o 6’ Tram Sat Ci“? an; “thdg at A5563 “gamut/trig QXBHYM] assets in Veto/glad Val/0W WAGEMENTASSERHONS During the audit, you find an entry in the sales journal for which their is no supporting shipping document or invoice. To which financial statement assertion does this condition relate? MNAGEMNTASSERTIONS During the audit, you find a check which was written that was never entered into the cash disbursements journal. To which financial statement assertion does this condition relate? Comp litter/L283 // 17. J\ 18. 19. OQWO‘N AUDIT RISK MODEL After performing tests of controls, our evidence indicates the client has great internal. controls. Consequently we assess control risk as low and the required level of detection risk as high. What does this imply about the extent of substantive tests of account balances we will need to perform \N 6. vol.“ pelQlOOiem N\Y\\W\0t\ So 303% White AUDIT RISK MODEL [3131541 E_ QLJEAZ TNOT SUBJECT TO SEC (SARBANES Omar) We have obtained a sufficient understanding of the client's internal controls and properly documented that understanding. We believe the client's controls are effective and we preliminarily assess control risk as LOW (LR: LOW (flint) ' ‘ o Describe t .. - . . what other the factors, if any, would you want to know before deciding whether to take a reduced level of CR approach or a substantive approach ? . if there are any other factors, discuss them a will you need to perform Tests of Controls 0 the amount of time you will spend Testing Controls relative to the amount of time spent performing Substantive Tests Wool-cl ‘rlfilfl‘i in) till-SW 43953 CD “5% 01C WV‘CCifivmw’lfl a we €O\Cr\ 306% MS? the cissz of teams $2546 of crime \5 \tes than “the Q. t of J€Y€CP~VVllfl6 Subset/H’ch he’s . \ ‘ W5, \NQ \N\\\ O Jtes’rs cf CDVWQ\S 0 if the 05% ,_ QewFoiawmzl traits of Cannot is move NA XQX I) W\\Y\ “Dowaiflli‘tfi’ 5r )‘h‘fl I i \fle Wt“ gm, AUDIT SKM DEL EC CL NT SUBJECT IDSARBANES OXLEY e have obtame a gawmm H, sufficient understanding of the client‘s internal controls and properly documented that H, {1 understanding. We believe the client's controls are ineffective and we preliminarily assess ' ' T " control risk as MAX 7 CE: o DescribeE' - what other the factors, if any, would you want to know before deciding whether to take a reduced level of CR approach or a substantive approach ? o if there are any other factors, discuss them . will you need to perform Tests of Controls - the amount of time you will spend Testing Controls relative to the amount of time spent performing Substantive Tests The (DEB-\- OQQS WU“? Maitefia Wfi MU‘Ji' Oliwcuilg veramm areas 016 comet o rt .9. SE C chm”: new geese Smee CE \ 3 “(MS \N-t WW 3*” -6% Spend Ox good mmoor‘t‘r 0? "WWW 'KV’?OEY\/l/tw@ Sommwfl 03 05: \NC“ MC.) CT? (/3 ( Q\(\"Tfl-O\ $- // 20. 21. , 22. TESTS OF CONTROLS Define Tests of Controls or describe the objective of performing Tests of Controls . maimed on extriner procedueee 0mm reasonable. assurance 0? p2 chem Col/HYDIS that Mal m Operatic/15 UNDERSTANDING THE CLIENT'SACCOIWTING SYSTEM In order to document our understanding of the client's accounting system (not internal controls but accounting system). We need to demonstrate that we understand the flow of transactions. Please list the steps between identifying "the various classes of significant transactions" and how those transactions get "placed in the financial statements and disclosures." — swag significant 00689.8 e?” mwgad‘itmg ~ types 0-? Ndlfiflol claw—mes on fiaod that Win ’Mt’thudf M WlllChd’l/Ul Sianfiamt Classes” am 1 (tun-towed immortal $320me ll’i lain 65%?03117” Syst—(m Abflamd m “ll/Ulfihalflfléll fatal WW’H'S TRANSACIYOMS' CYCLES Please name one transaction cycles and two classes of CCUJQ & 4/ transactions that would be included in that transaction cycle. '5 2.). flex/ewe ~03r\ om SGML .. Soles fiat/chub SIGNIFICA NT DEFICIENCY/ MA TERIA L WEA KNESS l am clth NNOA um Msetsdg oltcct Cl memtog (ll/Autism “\néoa’cej award, erodes. a reggae I livinhurtl (jam in “We. ~-“hn}th(t.il.l §tvvrt 5, Define significant deficiency. // 24. FRAUD Define fraud. 1 h. I | H h \mem wemresrmzhw m m hmnurd ‘9 Am M’s m mm pi? \hdocmg mm is \aehe'me W\ “M ~~mertprmcniahew 42. OH 0mm \t, fines causing damage, me \065, 25. THIRD STANDARD OF FIELD WORK write the third standard of field work figmtwfiflmvdm OUdti ewdcnca swat be 6 domed W m Odiddma +0 _ areas a 30035 as, 0m new on “hut . “Kimmy” harmed SflV-Wms swim OWCU'L. 26. BANK CONFIRAMHON Regarding a bank confirmation. 5 " WAD meet rewrit- 5x MW .67 «We v And (\‘bfl X o 16CL‘FKL "iQffiUf‘jNFé its?) 32.23.62 ' WE; ( Qi'fitéc WV "it" ,m t‘mdrtow ° Ty (M5 01C Ac c, befits; _ (106% 3, Loan Accooh‘cs 1/, 27. BANK TMNSFER SCHEDULE On the schedule of bank transfers, Check 705 is for $560 from the Parent to the Subsidiary. In the Parent's books, the credit is recorded on Dec. 31, 13'}? fl fl“ 0 i 2004 while the debit for the cash receipt in the Subsidiary's books is recorded on Dec. 31, {SW i Q ‘1)“. a"! \l 2004. Will this cause the consolidated cash balance to be overstated or understated as of A Us 5"” Dec. 31,2004? :9 O NEWER 0v eves/Weed (V:— / \) md er‘ffim‘rc _ NOT related to the previous problem 28. ASSETACCOUNTS With regard to a typical asset account as of Dec. 3L 2005- Under Are we most concerned about overstatement or understatement? Complete Are we most concerned about existence or completeness 7 Will we vouch from the Gen. Ledger to the supporting documents 6' Trace or trace from the supporting documents to the Gen Ledger 29. REVENUE ACCOUNTS With regard to a typical revenue account for the year Under Are we most concerned about overstatement or understatement ? /_ LO Complete Are we most concerned about occurrence or completeness ? Will we vouch from the Gen Ledger to the supporting documents W. Trace or trace from the supporting documents to the Gen Ledger 30. CASH ACCOUNTS We are concerned that cash might be overstated "’ @ Under Are we concerned that Cash Receipts will be overstatement or understatement ? 6 - ccu Complete Continuing with Cash Receipts, are we concerned about occurrence or completeness ’? Continuing with Cash Receipts, will we vouch from the Gen. Ledger to the supporting documents @5 Trace or trace from the supporting documents to the Gen Ledger ...
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This homework help was uploaded on 02/07/2008 for the course BUS 425 taught by Professor Tadmiller during the Spring '05 term at Cal Poly.

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Bus425 spring05 Auditing - BUS 425 Auditing Tad Miller 1...

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