Professional Documents
Culture Documents
Inherent Risks
Lease Accounting Loan covenants Related party transactions Complex transactions Impairments
10-4
10-5
Control Considerations
Transactions authorized by BOARD OF DIRECTORS Documentation: Investments in securities: BROKER'S ADVICE Property, plant and equipment: VENDOR'S INVOICE (for purchased PPE) or INTERNAL COST RECORDS (for manufactured PPE) Bonds and notes payable: Documentation from DEBTHOLDERS Stockholders' Equity: Documentation from REGISTRAR CASH RECEIPTS/DISBURSEMENTS JOURNALS
10-6
10-9
LOAN PAYOFF
Recalculate Interest Expense Recalculate Gain/Loss on Retirement Verify cash disbursements
10-10
INTEREST-BEARING LIABILITIES
INTEREST PAYMENTS Recalculate Interest Expense Search for UNRECORDED liabilities Inquiry of management Bank confirmations Unusual amounts of interest expense Large receipts of cash during the year Ensure DEBT COVENANTS are met. Inspect loan agreements. Consider GOING CONCERN implications if not met. Ensure proper presentation and disclosure.
10-11
PAID-IN CAPITAL
Agree balances to prior year documentation Examine issuances and repurchases of capital stock Verify distribution of proceeds between CAPITAL STOCK and ADDITIONAL PAID-IN CAPITAL Examine CASH RECEIPTS and CASH DISBURSEMENTS records Determine that all transactions are RECORDED (TRACE from BOD minutes) Verify that all transactions are PROPERLY AUTHORIZED
RETAINED EARNINGS
Agree beginning balance with prior year documentation Verify the appropriateness of prior-period adjustment treatment Trace net income/loss to INCOME STATEMENT Ensure that DIVIDENDS are properly authorized by BOARD OF DIRECTORS
10-12
10-13
10-14
Propriety, effectiveness, and risk disclosure of derivative securities used as a hedges Determination of the fair value of derivatives and securities, including valuation models and the reasonableness of key assumptions. Determination of significant influence relationship for equity method investments.
10-15
10-17