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Date
Comments
Planning
Fieldwork
Report Issuance (Local)
Report Issuance (Worldwide)
AUDIT OBJECTIVES
To determine if:
The cash balances represent all cash and cash items on hand, in transit to or in financial institutions,
and are properly recorded
The cash balances are properly described and classified, and adequate disclosures are made of
restricted or committed funds and of cash not subject to immediate withdrawal
Receivables represent all amounts owed to the entity at the balance sheet date and have been
properly recorded
The allowances for doubtful accounts, returns, and allowances and discounts are adequate but not
excessive
Receivables are properly described and classified, and adequate disclosures with respect to these
amounts (including disclosures of amounts that have been pledged, discounted, or sold with recourse
or are with related parties) have been made
Prepaids and other assets represent all proper charges or amounts that can be reasonably expected
to be realized through future operations or otherwise, and are properly recorded
Prepaids and other assets are properly described and classified, and adequate disclosure with respect
to these amounts has been made
A/P represent all amounts currently payable by the entity for resources and services acquired at the
balance sheet date and have been properly recorded
A/P are properly described and classified and adequate disclosures with respect to these amounts
have been made
Source: www.knowledgeleader.com
Fixed assets represent all tangible assets owned or held under capital lease that are used in the
entity's operations or are under construction, and they are properly recorded at cost on a consistent
basis
Additions to fixed assets during the audit period are proper capital charges and represent all actual
physical properties installed or constructed
Accrued liabilities represent all obligations for resources and services acquired through the balance
sheet date and have been properly recorded
Accrued liabilities are properly described and classified and adequate disclosures with respect to
these amounts have been made
Suspense accounts are monitored and cleared timely
Clearing accounts are monitored and cleared timely
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General
Review the CTB account checklist to ensure that each account on the TB is
assigned to someone for reconciliation.
Cash
Analytical Procedures: General & Review of Cash Management System
Compare the balance of each significant cash and cash equivalent account
with the comparable balance for the preceding period. Investigate
significant or unusual fluctuations.
Obtain an understanding of the client's cash management system and the
business purposes of the practices involved. Document this information in
a memorandum.
Tests of Bank Reconciliations
Obtain a copy of client-prepared bank reconciliations.
Test clerical accuracy.
Tie bank balance per reconciliation to bank statement, bank confirm, and to
lead schedule or trial balance.
Obtain a list of outstanding checks for selected accounts.
Clerically test list of checks and compare the list to the bank
reconciliation.
Scan each list for unusual amounts (e.g., round amounts, repetitive
amounts, unreasonably large amounts, etc.). List any such items for
further investigation.
Test completeness of the outstanding checklist through review of the
month bank statement, noting inclusion of all checks written prior to
period-end and clearing in subsequent period.
Investigate any long outstanding checks. Determine whether an
adjustment is necessary.
Source: www.knowledgeleader.com
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Source: www.knowledgeleader.com
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Changes in the client's credit and collection policies that have occurred
during the audit period, including changes that have since been
reversed or modified
Impact of new products or new markets and whether they involve a
different, higher-risk customer
General economic conditions and trends adversely affecting the
client's customers
Have the client prepare an analysis (roll forward) of the allowance for
doubtful accounts for the current audit period. Verify the clerical accuracy
of the analysis and test it as follows:
Cross-reference the provision for the current period to the appropriate
expense lead schedule.
Compare the provision, write-offs, recoveries and the ending balance
for the current period with the comparable amounts for the preceding
audit period. Investigate significant or unusual fluctuations.
Test write-offs during the current period as follows:
Review the listing of accounts written off and reconcile the totals with
the amounts charged to the allowance for doubtful accounts.
Determine whether proper approvals were obtained for selected writeoffs.
Have the client prepare a listing of individual large and/or past due
receivables for specific review of their probable collectability. SCOPE: >
$X & X days and all other balances > $X
Relate the totals of individual receivables listed to the client's aging of
receivables. Ensure that significant past due receivables are not
omitted from the listing.
Trace subsequent cash receipts to the cash records and examine
remittance advices.
Discuss the accounts with informed client personnel to obtain
additional background information.
Identify a range of specific allowances required for the total individual
receivables reviewed.
Based upon the review of the aging and historical write-off statistics, identify
a range of general allowances required for receivables not specifically
reviewed above.
Summarize the results of the specific and general review of the collectability
of receivables and determine an acceptable range of adequacy of the
allowance for doubtful accounts. Adjust the identified range for other
factors identified above that influence the collectability of receivables.
Compare the balance of the allowance for doubtful accounts as of the
balance sheet date with the acceptable range determined above. Propose
an adjustment, as appropriate, to ensure that the allowance falls within
the acceptable range.
Source: www.knowledgeleader.com
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Fixed Assets
Tests of Existence
Tour the client's plant facilities and observe the type and condition of
property in place. Note any excess, unusable or idle facilities.
Obtain an understanding of the client's policies, procedures and controls for
performing physical inventories of property (e.g., frequency or criteria for
determining the need for a physical inventory).
Tests of Fixed Asset Additions
Discuss with appropriate client personnel the approval process as it relates
to additions to property.
Obtain fixed asset register from corporate. Clerically test. Trace beginning
balances to the working papers for the prior period and tie ending
balances to the G/L control accounts.
Review detail of property additions and retirements during the period at each
individual location. Note that the descriptions indicated for property
additions appear to describe items that are properly capitalizable under
the client's accounting policies and relate to the client's business.
Vouch and/or observe additions at individual locations and note approval by
the appropriate levels of authority. SCOPE: All additions > $X.
Determine that the total cost of any plant and equipment purchased on an
installment plan or held under capital lease agreements is reflected in the
asset accounts and that the unpaid obligations are accrued as liabilities.
Determine whether old equipment traded in or replaced by the new units has
Source: www.knowledgeleader.com
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Accrued Liabilities
Analytical Procedures
Compare the balance of each significant accrued liabilities account with the
comparable balance for the preceding period. Investigate significant or
unusual fluctuations.
Detail Tests of Accrued Fringe Benefits
Obtain an understanding of the client's vacation and holiday pay policies.
Review written policies and discuss with management compliance with
the policies.
Test calculation of accruals for vacation and holiday pay. Ensure
completeness of accrual through review of the payroll register. Compare
with similar calculations for the preceding period. Investigate significant
differences.
Source: www.knowledgeleader.com
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Source: www.knowledgeleader.com