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Testing the existence objective for sales what are the three types of misstatements
a. Sales included in the journals for which no shipment was made
b. Sales recorded more than once
c. Shipments made to nonexistent customers and recorded as sales
2. Alternative procedures to test the existence for accounts receivable.
a. Subsequent cash payments
b. Duplicate sales invoices
c. Correspondence with the client
d. Payment has already been made
e. Goods have not been received
f. The Goods have been returned
g. Clerical errors and disputed amounts
3. Circumstances to use negative confirmation.
a. Risk of material misstatement assessed is low
b. The auditor acquired sufficient appropriate evidence in test of controls
c. Big population of small accounts
d. Auditors expects a low exception rate.
e. Auditor has a reasonable assumption that the recipients of the negative confirmation
will give the confirmation a reasonable consideration.
4. Exception for not confirming receivables
a. The auditors considers confirmation as ineffective
b. The combined level of inherent risk and control risk is low. Evidence could be obtained
using substantive testing.
5. Audit procedures for out-of-period liabilities - 609
a. Examine underlying documentation for subsequent cash disbursements
b. Examine underlying documentation for bills not paid several weeks after the year end
c. Trace receiving reports issued before year end to related vendors invoices
d. Trace vendors statements that show a balance due to the accounts payable trial balance
e. Send confirmation to vendors with which the client does business
6. Sales cut-off tests
a. Determine the method used to record transfer of ownership
b. Method used to determine cutoff must comply with accounting standards
c. Segregation between shipping and billing departments
d. Sequential numbered documents can make it easy to test for cutoff
e. Obtain the last shipping document at the end of the year
f. Compare the number of the document the number of documents before and after that
shipping document.
7. Cutoff bank statement purpose
a. Verify that the clients reconciliation is mathematically accurate
b. Trace the balance on the bank confirmation and the beginning balance of the cutoff
statement to the bank reconciliation
c. Trace checks recorded in the cutoff statement to the reconciliation statement
d. Any material checks on the bank reconciliation that havent cleared in the cutoff
statement

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e. Trace deposits in transit to the cutoff bank statement

Purpose of testing the clients bank reconciliation, and audit evidence and procedures
a. Verify that the clients bank reconciliation is mathematically correct
b. Trace the balance on the bank confirmation and cutoff statement to bank reconciliation
c. Trace checks recorded in the cutoff statement to the reconciliation statement
d. Any material checks on the bank reconciliation that havent cleared in the cutoff
statement
e. Trace deposits in transit to the cutoff bank statement
Two primary types of subsequent events
a. Direct have a direct effect on financial statements
i. Declaration of bankruptcy
ii. Settlement of litigation for a different amount than what is recorded on the
books
iii. Disposal of equipment
b. Indirect dont have a direct effect
i. Decline in market
ii. Issuance of bonds
iii. Decline in inventory prices
iv. Fire incidents
v. Mergers or acquisition
Three audit procedures commonly used to search for contingent liabilities
a. Review current and previous years internal revenue agent reports
b. Review the minutes of directors
c. Analyze legal expense for the period under audit and review invoices and statemetns
from legal counsel for indications of contingent liabilities.
d. Confirmation with company attorney for any contingent liabilities
Purpose of Aps during final review
a. Identify possible oversight in the audit
b. Going concern issues
c. Indicating possible material misstatements
Sales and receivable internal control authorization points
a. Credit must be properly authorized before a sale takes place
b. Goods should be shipped only after proper authorization
c. Prices, including basic terms, freight, and discounts, must be authorized
Important controls over cash disbursements
a. Signing of checks by an individual with proper authority
b. Separation of responsibilities for signing checks and performing the accounts payable
function
c. Careful examination of supporting documents by the check signer at the time the check
is signed
Final communication requirements to the audit committee
a. To communicate auditor responsibilities in the audit of financial statements
b. To provide an overview of the scope and timing of the audit

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c. To provide those charged with governance with the significant findings arising during
the audit
d. To obtain from those charged with governance information relevant to the audit
Main purpose of client representation letter
a. Recommendations to improve any part of the clients business
Subsequent event and discovery actions
a. Auditor actively searches for subsequent events from year end to the audit report date
b. Auditor doesnt search for any subsequent events between audit report date and
issuance of financial statements dates
c. No responsibilities to do anything, after issuance of financial statements
Interbank transfer schedules
a. The interbank transfers must be recorded in both the receiving and disbursing banks
b. The date of the recording of the disbursements and receipts for each transfer must be in
the same fiscal year
c. Disbursements on the interbank transfer schedule should be correctly included in or
excluded from the year end bank reconciliation as outstanding checks.
d. Receipts on the interbank transfer schedule should be correctly included in or excluded
from year-end bank reconciliation as deposits in transits.
Key controls tested for acquisition and payments
a. Proper authorization for the issue of new notes
b. Adequate controls over the repayment of principal and interest
c. Proper documents and records
d. Periodic independent verification
Confirming accounts payable
Determine reasonableness of cutoff
a. decide on the appropriate criteria for cutoff
b. evaluate whether the client has established adequate procedures to ensure a
reasonable cutoff
c. test whether the cutoff was correct
Testing accuracy, existence, classification and rights for accounts receivable
a.
The purpose of different documents AP/purchase, sales, A/R
a. Control system
b. Segregation of duties
c. Dated
d. Traceability
Control to recognize a liability or sale
a.