Accounting Processing Cycle Detail
External Journal transactions for July 2016
1 Two people each invested $30,000 in the corp. Each issued 3,000 shares of common stock.
1 Borrowed $40,000 from bank and signed two notes; 1) $10,000 paid + 10% int in 6
1: Environment and Theoretical Structure of Financial Accounting
Financial accountings primary function is to provide financial info to external users, i.e. Investors and creditors.
Primary means financial statements and related notes
2: Review of the Accounting Process
Review fundamental accounting processes used to produce financial statements.
Accounting systems differ btwn companies, but ch. 2 focuses on common features
Audit risk is a fundamental concept that underlies the audit process. It is the risk that the
auditor expresses an appropriate audit opinion when the financial statements are materially
misstated. The risk that an auditor will is
Audit Planning, Types of Audit Tests, and Materiality
Phases That Relate to Audit Planning
Client acceptance and continuance
o Acceptance a public accounting firm should investigate a prospective client
prior to accepting the engagement
Auditing the Revenue Process
Revenue is defined as inflows or other enhancements of assets of an entity or settlements of its
liabilities (or a combination of both) from delivery or producing goods, rendering services, or
other activities that
The Financial Statement Auditing Environment
Types of Auditors:
External Auditors often referred to as independent auditors; may practice as a sole
proprietor or as a member of a CPA firm
o They are not employees of the entity being audited
Evidence and Documentation
Auditors gather evidence by conducting audit procedures to test management assertions. This
evidence serves as the support for the auditors opinion about whether financial statements are
An Introduction to Assurance and Financial Statement Auditing
Auditing focuses on learning the analytical and logical skills necessary to evaluate the relevance
and reliability of financial information as well as of the systems and processes res
Auditing the Purchasing Process
Journal Entries Involved in Recognizing Expenses and Liabilities
o Accounts payable
o Purchases or cost of goods sold
o Various asset and expense accounts
Cash disbursement transa
Audit Sampling and Sample Risk
Audit Sampling the selection and evaluation of less than 100% of the items in a
population of audit relevance selected in such a way that the auditor expects the sample
to representative of the popul
Internal Control in a Financial Statement
A system of internal control is designed and carried out by an entitys board of directors,
management, and other personnel to provide reasonable assurance about the achievement of
the entitys objectives
Auditing Internal Control Over Financial Reporting
What must management do under SOX 404?
Accept responsibility for the effectiveness of the entitys ICFR
Evaluate the effectiveness of the entitys ICFR using suitable control criteria
Interview with Machine Operator
Auditor: Hi Im an auditor with the companys External Auditing Team. I was told that you were on break,
so Id like to ask you a couple of questions.
Operator: Yeah, thats great. They told me you might be by.
A: First, Id jus
Internal Auditor Interview
Auditor: Hi, Im part of the External Auditing team. I was just hoping to ask you a couple of questions.
Internal Auditor: Sure. That would be great.
A: Great. Could you tell me how long youve been with Alchemy Inc.?
I: Ive been
Interview with Receive Clerk
Auditor: Hi, Im an auditor with your External Auditing team. I was hoping to ask you a few questions. Is
now a good time?
Receive Clerk: Yeah, sure. This is my break.
A: How long have you been with the company?
R: Two years.
Interview with CEO
Auditor: Chris, thanks for meeting with us.
Chris E. Ready: Good morning, Pat. Nice to see you again. Pease sit down.
A: Did you receive the agenda I emailed to you?
C: Yes, I did. Thanks. I read it and reviewed the areas you wanted to
Interview with Ship Clerk
Auditor: Hi, Im an auditor with your External Auditing team. I was hoping to ask you a couple questions.
Is now a good time?
Ship Clerk: Yeah, sure. Whats up?
A: Can you tell me a little bit about your background? How long youve
ACC331 Final Review Chapter 9
Muckenthaler Company sells product 2005WSC for $30 per unit. The cost of one unit of
2005WSC is $27, and the replacement cost is $26. The estimated cost to dispose of a unit is $6,
and the normal profit is 40%. At what amo
ACC331Chapter 10 Review for Final
On February 1, 2012, Nelson Corporation purchased a parcel of land as a factory site for
$250,000. An old building on the property was demolished, and construction began on a new
building which was completed on Novembe
Chapter 4 Review for the Final -1.Ortiz Co. had the following account balances:
Cost of goods sold
Salaries and wages expense
ACC331 Chapter 11 Review for Final
Ferguson Company purchased a depreciable asset for $120,000. The estimated salvage value is
$10,000, and the estimated useful life is 10 years. The straight-line method will be used for
depreciation. What is the depre
Chapter 7 Review for the Final - Accounting
1.Consider the following: Cash in Bank checking account of $18,500, Cash on hand of $500,
Post-dated checks received totaling $3,500, and Certificates of deposit totaling
$124,000. How much should be reported as
Chapter 6 Review - Accounting
Assume ABC Company deposits $50,000 with First National Bank in an account earning
interest at 6% per annum, compounded semi-annually. How much will ABC have in the
account after five years if interest is reinvested?
Chapter 2 Review - Accounting
1. Which basic assumption is illustrated when a firm reports financial results on an annual
a. Economic entity assumption.
b. Going concern assumption.
c. Periodicity assumption.
d. Monetary unit assumption.
2. Which a
Chapter 5 Review for the Final
For Grimmett Company, the following information is available:
In Grimmetts balance sheet, intangible assets should be reported at
E5-1 (Moderate 15 minutes)
1. Property taxes receivable
Allowance for refunds and uncollectible taxes
Revenues property taxes
To record property tax levy.
2. Allowance for refunds and uncollectible taxes
Property taxes receivable
To record adjus
Materiality is the amount of
misstatement that probably would have
made a difference in the judgment of
a reasonable user who is relying on
Auditors consider materiality in
3 phases of the audit: planning,
Help for auditors in evaluating financial statement misstatements.
the Abuse of Materiality
BY C. TERRY GRANT, CHAUNCEY M. DEPREE, JR.,
AND GERRY H. GRANT
EARNINGS MANAGEMENT HAS RECEI