Kế toán, kiểm toán - Chapter 16: Auditing operations and completing the audit

Accounts receivable


Notes receivable

Securities and


Property, plant and


Intangible assets Prepaid expenses Accrued liabilities


Interest, dividends,

gains, investee’s income


 accounts Uncollectible notes Losses

Purchases, cost of goods sold, payroll


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Auditing Operations and Completing the AuditChapter 16Relationships Between Balance Sheet and Income Statement AccountsBalance Sheet ItemRevenueExpensesAccounts receivable Notes receivable Securities and investmentsSales Interest, Interest, dividends, gains, investee’s incomeUncollectible accounts Uncollectible notes LossesInventoriesPurchases, cost of goods sold, payrollProperty, plant and equip. Intangible assets Prepaid expenses Accrued liabilities Rent, gains RoyaltiesDepreciation; repairs Amortization Various expenses Various expensesInterest-bearing debtInterest2Substantive Tests for Selling, General and Administrative ExpensesPerform analytical proceduresDevelop an expectation of the account balanceDetermine the amount of difference from the expectation that can be accepted without investigationCompare the company’s account balance with the expected account balanceInvestigate significant deviations from the expected account balanceObtain or prepare analyses of selected expense accountsObtain or prepare analyses of critical expenses in the income tax return3Segregation of Functions--Payroll Employment (personnel) Timekeeping Payroll preparation and record keeping Distribution of pay to employees4Substantive Procedures for Payroll5 Audit Procedures Completed Near the End of Field WorkSearch for unrecorded liabilitiesReview the minutes of meetingsPerform final analytical proceduresPerform procedures to identify loss contingenciesPerform the review for subsequent eventsObtain the representation letter6 Loss ContingenciesLoss contingencies should be reflected in the financial statement amounts when:It is probable that a loss had been sustained before the balance sheet dateThe amount of the loss can be reasonably estimatedLoss contingencies should be disclosed in the notes to the financial statements when it is at least reasonably possible that a loss has been sustainedLoss contingencies need not be disclosed when the possibility of loss is remote7Responsibility for Subsequent Events8Procedures to Identify Subsequent EventsReview latest available financial statements and minutes of the board and selected committeesInquiry about matters dealt with at meetings for which minutes are not availableInquiry of managementObtain lawyer’s letterObtain representations from management9Total Likely Misstatement Overstatements (Understatements)W/P ref. Current Assets Noncurrent Assets Current Liabilities Noncurrent Liabilities Owners’ EquityIncome before Taxes Tax ExpensesUncorrected Known MisstatementsD-8Overstatement of prepaid expenses$6,500 $2,600$6,500 (2,600)$6,500 $2,600F-6Overstatement of prior years’ depreciation($10,000) (4,000)(10,000) 4,000M-4Unrecorded liabilities(11,215) 4,48611,215 (4,486)11,215 4,486Projected MisstatementsC-5Overstatement of accounts receivable (confirmation results)30,000 12,00030,000 (12,000)30,000 12,000Other Estimated MisstatementsC-10Understatement of allowance for uncollectible accounts5,000 2,0005,000(2,000)5,000________ 2,000Total Likely Misstatements$41,500($10,000)$5,871$25,629$52,715$21,086Amount considered material$100,000$125,000$100,000$125,000$200,000$150,00010 Responsibility for Other Information with the Financial StatementsFASB or GASB-Required Supplementary Information--The auditors have a responsibility to perform limited procedures on the information for compliance with the applicable FASB or GASB Statements and modify their report to indicate when the information is not presented, not appropriately presented, or the auditors were not able to complete the limited procedures.Other Information in Client-Prepared Documents--The auditors have a responsibility to read the information for inconsistencies with other information known to the auditors and for material misstatements, and to consider modifying their report, withholding the use of their report, or withdrawing from the engagement if the client refuses to revise any misstated information.Information Accompanying Financial Statements in Auditor-Submitted Documents--The auditors have a responsibility to report on all information in documents prepared or submitted by them. 11 Required Communication With the Audit CommitteeFraudulent or illegal actsSignificant deficiencies in internal control (previously referred to as Reportable Conditions)The auditors’ responsibilities for the audit and other information included with the financial statementsSignificant audit adjustments made Proposed audit adjustments evaluated by management as immaterial Information regarding management’s selection of accounting principlesInformation regarding significant accounting estimates made by managementDisagreements with management or other difficultiesThe auditors’ viewpoint on an accounting or auditing matter if management contacted other auditors about the matterA discussion of the quality of accounting principles and estimates12

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