What is accounting?
The process of identifying, recording, updating, summarizing, and reporting information
regarding economic states and events.
As it should be?
Consistent with GAAP
Free of misstatements
How to audit fin
Engagement risk is
The auditor's risk of loss from events arising in connection with financial statements
audited and reported upon.
Client risk as defined in the text is
The overall risk of material misstatement.
Under Statements on Auditing Standards, w
Define what is meant by contingent liability.
An existing condition, situation, or set of circumstances involving uncertainty as to
possible loss to an entity that ultimately will be resolved when a future event to occur.
What categories are used to class
Why are indexing and Cross-referencing important to the
documentation of audit working papers?
So audit team can find relevant information with ease. provides a trail from F/S to the
individual working papers.
objectives of audit documentation
The set of facts stated explicitly or implicitly in or through accounting numbers /
disclosure in the financial statements
Management Assertions- Income Statement (6)
1. Existence/ Occurrence
Invitation v Offer
Pharmaceutical Society of Great Britain v Boots Cash Chemists Ltd: Birkett LJ states
that the act of a customer picking up an item from the shelf is not an act of acceptance
of an offer, it is merely the customer's 'offer' to buy. only
Magnitude of an omission or misstatement of accounting information that, in light of
surrounding circumstances, makes it probable that the judgement of a reasonable
person relying on the information would have been changed or influenced by the
_% of all public co had audits b4 law required them to.
Reasons why organizations have audits (3)
1. intrinsic value: have incentives to go out and veri
ACL, Definition, 1.
ACL, Definition, 3
ACL, Definition, 4
Misleading representation with respect to future matters
ACL, Definition, 7
ACL, DEfinition, 9
Meaning of safety defect in relation to goods
ACL, Section 18
Business relationships: (relating to rule 101)
i.No managerial function during the time of the attest service
ii.Moves from CPA firm to the client
iii.Moves from client to CPA firm
iv.Close relative in key position at client (mana
A well planned audit should be: (2)
Steps in Planning an Audit
1. Gain understandingof business and business processes
2. Determine k
WAREN SPORTS SUPPLY, YEAR-END WORKSHEET, DECEMBER 31, 2013
TRANSACTIONS LIST A
(Accounts with no activity in this worksheet are excluded in this solution.)
Warren Sports Supply
Statement of Cash Flows
Year Ended 12-31-13
CASH FLOWS FROM OPERATING ACTIVITIES
Adjustments to reconcile net income (loss)
to net cash from operating activities
Gain on sale of fixed assets
WSS - ACCOUNTS RECEIVABLE AGED TRIAL BALANCE DECEMBER 12-31-13
AGE IN DAYS
31 - 60
E. Wisconsin Univ.
WAREN SPORTS SUPPLY
STATEMENT OF INCOME AND RETAINED EARNINGS
For the Year Ended December 31, 2013
Less:Sales Returns and Allowances
Less: Sales discount taken
Cost of Goods Sold
WAREN SPORTS SUPPLY
AT DECEMBER 31, 2013 AND 2012
Accounts receivable - net
Total current assets
FIXED ASSETS - Net of
CPAs become involved in a variety of types of engagements. For each of the following statements, indicate whether
it relates to an examination (E), review (R), or agreed-upon procedures (A) engagement. If the statement does not
relate to examinations