auditing the financing/investing process: cash and investments · 2014-08-11 · auditing the...
TRANSCRIPT
Chapter 16
Auditing the Financing/Investing Process: Cash and
Investments
McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.
Cash and the Effect of Major Accounting
Transactions/Business Processes
LO# 1
16-2
Types of Bank Accounts
In order to optimize its cash flow, an entity implements
procedures for accelerating the collection of cash
receipts and delaying the payment of cash
disbursements, to the extent delay is appropriate.
General Cash
Account
Imprest Cash
Accounts
Branch
Accounts
Types of Bank
Accounts
LO# 2
16-3
Substantive Analytical
Procedures—Cash
This limited applicability of substantive analytical procedures is normally offset
by (1) extensive tests of controls and/or substantive tests of transactions for cash
receipts and disbursements or (2) extensive tests of the entity’s bank
reconciliations.
Because of the residual nature of
the cash account, the auditor’s
use of substantive analytical
procedures for auditing cash is
limited to . . .
comparisons with
prior years’ cash
balances.
comparisons with
budgeted amounts.
LO# 3&4
16-4
Substantive Tests of Details
of Transactions and Balances
LO# 3&4
16-5
Balance-Related Assertions
LO# 3&4
16-6
Auditing the General Cash
Account
Copy of Bank
Reconciliation
Standard Bank
Confirmation
Cutoff Bank
Statement
To audit a cash
account, the auditor
should obtain these
items.
LO# 5
16-7
Fraud-Related Audit Procedures
Extended Bank
Reconciliation
Procedures
Proof of Cash
Tests for Kiting
LO# 6
16-8
Disclosure Issues for Cash
LO# 6
16-9
Auditing Investments
Common Stock Preferred Stock
Debt Securities Hybrid Securities
LO# 7
16-10
Control Risk Assessment—
Investments
Occurrence
and
Authorization
Completeness
Accuracy and
Classification
Here are some of the more
important assertions for
investments.
LO# 8
16-11
Segregation of Duties
LO# 9
16-12
Substantive Procedures for Testing
Investments
LO# 10
16-13
Advanced Module: Auditing Fair
Value Measurements
LO# 11
ASC Topic 820 Levels
Level 1: Valuations based on quoted prices in active markets for identical assets. Also known as “marking to market.”
Level 2: Valuations based on directly or indirectly observable market data for similar assets. Also known as “marking to matrix.”
Level 3: Valuations based on management’s best judgment and involve management’s assumptions. Also known as “marking to model.”
16-14
Advanced Module: Auditing Fair
Value Measurements
LO# 11
Obtain an understanding of how management makes the fair value measurements.
Consider whether specialized skills or knowledge are required.
Test the entity’s fair value measurements.
Evaluate the reasonableness of the fair value measurements.
16-15
End of Chapter 16
16-16