General rule: separate cash handling, recordkeeping, and reconciliation of

bank statements (authority, recordkeeping, custody).

General accounting department
Voucher for payroll amounts.
Personnel department
Send hire and termination notices to payroll department.
Approves changes in pay rates and deductions from employee salaries.
Payroll department
Prepares payroll checks (does not sign. Treasury signs payroll checks.)
Recordkeeping.
Accounts payable
Reconcile vendors invoice with receiving report and purchase order.
Verify mathematical accuracy of vendors invoice.
Approve vouchers for payment by authorized person.
File invoices and supporting documentation after payment.
Treasurer/cashier
Stamp, perforate, or cancel supporting documentation after payment is mailed.
Authorize write-offs of uncollectible accounts.
Sign payroll checks.
Daily deposit slip.
Remittances from mailroom.
Clerk
Open mail, prepare a prelist of individual checks.
Internal auditor
Monthly bank reconciliation (or anyone else independent of cash receipts and
disbursements).
Remittance advice is prepared by the customer.
Preparing invoices and recording receivables are not compatible.
Purchasing department
Ascertain that the requisition is properly approved for price, quantity, and quality before
the purchase order is prepared.
Prepare purchase order.
Negotiate terms with vendors.
Billing department

Match prenumbered shipping documents with entries in the sales journal.

o This ensures all credit sales transactions are recorded.
SASs are guidelines for auditors of issuers. PCAOB are for issuers.
SSARS are for nonissuers.
Explicit: obtaining evidence that is sufficient and appropriate.
Implicit: consistent application of accounting principles.
Dual-dating is used when there is a subsequent event occurring after the original date of
the audit report, and the auditor wishes to extend responsibility.
o Not used for comparative F/S.
o Only used if subsequent event is disclosed.
Statements on Standards for Accounting and Review Services (SSARS) nonissuers.
Private, nonpublic.
SASs are for issuers/public companies.
Year-end procedures are more effective and provide more assurance than interim-date
testing.
Restricting the use of a report is only required when element is prepared to comply with a
contract or agreement rather than in accordance with GAAP.
Final review stage analytical procedure: comparing current and prior-year statements.
Related party transactions = valuation, allocation, and accuracy.
o Nonrecurring.
Audit report:
o Implicit:
Consistency (if NOT consistent the EXPLICIT)
Adequacy of disclosures
o Explicit:
F/S prepared in accordance with GAAP.
Obtaining evidence that is sufficient and appropriate (unmodified and
modified opinions).
Auditor responsibility: Disclaimer of Opinion: Modified to indicate
auditor unable to obtain sufficient appropriate audit evidence to provide a
basis for an opinion.
o Engagement agreement:
In writing:
Objectives,
Limitations,
Responsibilities of management,
Responsibilities of auditor,
Compliance with laws,
Internal control.
o Materiality: use smallest misstatement that could be material across F/S and
lowest thresholds.
Restrict report when:
o Contractual agreements,

o Regulations,
o Agreed-upon procedures.
Include a final paragraph explaining the restriction.

Compilation report:
o Explicit: financial statements have NOT been audited, and accountant has
compiled financial statements.
Each page of compiled F/S should state See Accountants Compilation
Report
A statement that the compilation was performed in accordance with
standards established by the American Institute of CPAs.
A statement that the accountant has not audited or reviewed the financial
statements.
A statement that a compilation is limited to presenting, in the form of
financial statements, information that is the representation of management.
o Dated at completion of compilation.
o Compilation report must be issued even if the F/S are for internal use only.
o No third-party rule is no longer in effect.
Review report:
o Each page of reviewed F/S should state See Accountants Review Report
o Explicit:
Review consists of inquiries and analytical procedures.
Review is substantially less than audit.
No opinion expressed.
Accountant not aware of material modifications needed to make.
A review includes primarily applying analytical procedures and inquiries
of management.
o Regular review:
Do not obtain understanding of internal control.
o Interim review:
Required to understand internal control.
Prospective F/S:
o AICPA guidelines of presentation.
o A statement that the prospective results may not be achieved.
o A statement that the accountant is not responsible for updating the report.
o Limitations on the use of the statements if the presentation is a projection.
Pro forma F/S:
o They consider an event or transaction that had not occurred as of the financial
statement date.
o They are restated to provide the information as if the event or transaction had
occurred.
Single Audit Act:
o Requires report on internal control and operating effectiveness.

o Apply to entities that receive and expand $500K in federal assistance in fiscal
year.
CVER account balances
COVEU transactions & presentation
CVRU disclosure