tailieunhanh - Lecture Principles of auditing and other assurance services (15/e): Chapter 16 - Whittington, Pany

Chapter 16 - Auditing operations and completing the audit. The goals of this chapter are: Identify the audit objectives for revenue and expense accounts, explain the relationships between revenue and expense accounts and balance sheet accounts, describe the fundamental controls over payroll,. | Auditing Operations and Completing the Audit Chapter 16 1 Relationships Between Balance Sheet and Income Statement Accounts Balance Sheet Item Revenue Expenses Accounts receivable Notes receivable Securities and investments Sales Interest, Interest, dividends, gains, investee’s income Uncollectible accounts Uncollectible notes Losses Inventories Purchases, cost of goods sold, payroll Property, plant and equip. Intangible assets Prepaid expenses Accrued liabilities Rent, gains Royalties Depreciation; repairs Amortization Various expenses Various expenses Interest-bearing debt Interest 16- 2 2 Substantive Tests for Selling, General and Administrative Expenses Perform analytical procedures Develop an expectation of the account balance Determine the amount of difference from the expectation that can be accepted without investigation Compare the company’s account balance with the expected account balance Investigate significant deviations from the expected account balance Obtain or . | Auditing Operations and Completing the Audit Chapter 16 1 Relationships Between Balance Sheet and Income Statement Accounts Balance Sheet Item Revenue Expenses Accounts receivable Notes receivable Securities and investments Sales Interest, Interest, dividends, gains, investee’s income Uncollectible accounts Uncollectible notes Losses Inventories Purchases, cost of goods sold, payroll Property, plant and equip. Intangible assets Prepaid expenses Accrued liabilities Rent, gains Royalties Depreciation; repairs Amortization Various expenses Various expenses Interest-bearing debt Interest 16- 2 2 Substantive Tests for Selling, General and Administrative Expenses Perform analytical procedures Develop an expectation of the account balance Determine the amount of difference from the expectation that can be accepted without investigation Compare the company’s account balance with the expected account balance Investigate significant deviations from the expected account balance Obtain or prepare analyses of selected expense accounts Obtain or prepare analyses of critical expenses in the income tax return 16- 3 3 Segregation of Functions--Payroll Employment (personnel) Timekeeping Payroll preparation and record keeping Distribution of pay to employees 16- Substantive Procedures for Payroll 16- Audit Procedures Completed Near the End of Field Work Search for unrecorded liabilities Review the minutes of meetings Perform final analytical procedures Perform procedures to identify loss contingencies Perform the review for subsequent events Obtain the representation letter 16- 4 4 Loss Contingencies Loss contingencies should be reflected in the financial statement amounts when: It is probable that a loss had been sustained before the balance sheet date The amount of the loss can be reasonably estimated Loss contingencies should be disclosed in the notes to the financial statements when it is at least reasonably possible that a loss has been sustained Loss .