Class Notes at Nova Southeastern University

OPENING BALANCES in conducting an initial audit engagement, the objective of the auditor with respect to opening balances is to obtain sufficient appropriate audit evidence about whether: (a) Opening balances contain mi...

SUBSTANTIVE PROCEDURES Substantive procedures are performed by the auditor to: Gather evidence regarding the underlying assertions (C, E, A, V) that are embedded in the account balances and underlying classes of transa...

BENEFITS OF RISK BASED AUDIT Time Flexibility When Audit Work Needs to Be Performed Because risk assessment procedures do not involve the detailed testing of transactions and balances, they can be performed well before ...

ASSERTIONS 2 Occurrence Transactions and events that have been recorded have occurred and pertain to the entity. Completeness All transactions and events that should have been recorded have been recorded. Accuracy Amou...

Accounts Receivable Amounts Owed to the Business Accounts Payable Amounts a business owes for items or services purchased on credit not involving a promissory note. Account Numbers Numbers assigned to accounts ...

Sales discounts a temporary owner's equity contra sales account used to record discounts given to customers as an incentive for prompt payment. Sales invoice a source document prepared by the seller that lists the it...

LIMITATIONS Limitations Reasons The Nature of Financial Reporting The preparation of financial statements involves: Judgment by management in applying the applicable financial reporting framework; and Subjective dec...

Account a device for recording the changes (increases or decreases) in the fundamental accounting elements. Accountant one who is concerned with the design of the system of records, the preparation of reports based u...

EXAMPLES OF ASSERTION BASED RISK Examples of such factors that would increase inherent risk at the assertion level are: Complex transactions or calculations (e.g. derivatives or other financial instruments that are di...

AUDIT SAMPLING Audit Evidence identifies three ways that an auditor can select items for testing: 100% examination of the population Selecting specific items Audit sampling W-I-R stands for Weakness, Implication ...

FAR ... BEC ... Question Answer If there is commercial substance to an exchange, the exchange is measured at: Fair Value. The gain is equal to the old asset's fair value and it's book value. If the fair value...

Inventory turnover COGS / avg inventory Avg collection period for acc receivable? Net credit sales / avg net acc receivable.... then you divide 365 by that number What financial statements are required for the Gov...

For grants, what is a prime factor in determining eligibility for accrual? The expenditure of resources (spending the money) What would an entity most likely do to hedge an investment in a foreign operation? Borrow f...

How does the installment sale method work? Each payment consists of return of cost and gross profit. You calculate the gross profit percentage by taking the sales price and subtracting the carrying value, and then dividi...

ASPE 1000 ACCRUAL ACCOUNTING The objective of financial statements is to communicate information that is useful to investors, creditors and other users ("users") in making their resource allocation decisions and/or asses...