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AFM 202 Review

Tracing an accounts payable amount in the balance sheet with


reference to a vendors invoice.
What is existence?

Use a generalized audit software to run a gap test on the cheques


issues during the year. (Print a list of cheque numbers omitted
What is testing the control?

Review the R&D Expense account detail, pick 20 items and review the
relation A/P invoice to ensure it relates to Research and Development
and not to general administration expenses.
What is classification?

Performing an inventory count.


What is completeness? (Count first and then check and make sure its included on
the account listing)
What is existence? (
What is valuation?

Multiply the commission rate by total sales, and compare the result
with commission expense.
What is testing of detail?

Trace from the sales journal to shipping documents.


What is occurrence? (Making sure what happened actually happened)

Preparing accounts receivable confirmations to mail to the clients


customers.
What is existence? (Making sure the A/R exist to confirm clients receivable)

Choose ten items form the repairs and maintenance expense account
and match to the original invoice to ensure the expense is valid.
What is occurrence?
Existence (balance sheet, not income statement)
Occurrence (Income statement, concern with overstatement)
Completeness (everything that happened has been reordered, is there something
that should have been in the account that isntunderstatement)

Obtain a listing of employees who are authorized to access the payroll


system and test to ensure that these are the only system users allowed
access.
What is testing for control?

Compare pay rates with employee contracts.


What is accuracy? (Just looking at pay rates, making sure employees are paid the
right amount)

Trace the total of the account receivable list to the general ledger.
What is valuation?

Comparing the classes of property, plant and equipment listed in the


FS footnotes in the current year to last years annual report.
What is classification and understandability?

Confirm accounts receivables with customers


What is testing for detail?

Compare dates on the sales invoices and related shipping dates for
revenue just prior to year end to ensure that they relate to year under
audit (ie. Shipping and billed prior to YE)
What is testing for cut-off?

Examining vendor invoices that the client has not paid or processed.
What is completeness?

Recalculating depreciation for property, plant and equipment and


agree to expense account?
What is valuation? (Checking accumulated depreciation and accuracy assertion if
looking at depreciation expense)
What is testing for authorization controls?

Trace an accounts payable invoice paid after years end to general


ledger and expense account entry.
What is completeness and cut-off?

Performing a physical observation of the clients furniture.


What is existence, completeness?

Agreeing bank statement balances with bank reconciliations.


What is valuation? What is existence?

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