ACCT 4150 Lecture Notes - Lecture 8: Post-Office Box, Audit Risk, Interbank
Document Summary
Internal control operating effectiveness: selecting and performing controls. Obtaining substantive evidence: analytical procedures, reasonableness test and regression analysis a. time analysis comparing previous results, reliability of evidence, develop expectations, develop and identify unexpected differences, investigate and document unexpected differences. Timing differences: confirmation exceptions caused by transactions that are in the process at the confirmation date, such as in-transits or pending. False confirmation: situation in which the respondent to a confirmation request responds inaccurately with respect to information on the confirmation. Exceptions: differences between a customer"s records and the client"s records reported on positive or negative confirmations. Lapping: cover up the embezzlement of cash whereby a cash collection from one customer is stolen and covered up by an employee who takes another customer"s payment and credits the first customer (overstates one customer"s account) Collectability: risk that a seller will be unable to collect the entitled contractual consideration from the customer.
