17 - 1 copyright 2003 pearson education canada inc. chapter 17 completing the tests in the...
TRANSCRIPT
![Page 1: 17 - 1 Copyright 2003 Pearson Education Canada Inc. CHAPTER 17 Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts](https://reader030.vdocuments.net/reader030/viewer/2022032600/56649daf5503460f94a9cb0b/html5/thumbnails/1.jpg)
17 - 1Copyright 2003 Pearson Education Canada Inc.
CHAPTER 17Completing the Tests in
the Acquisition and Payment Cycle:
Verification of Selected Accounts
![Page 2: 17 - 1 Copyright 2003 Pearson Education Canada Inc. CHAPTER 17 Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts](https://reader030.vdocuments.net/reader030/viewer/2022032600/56649daf5503460f94a9cb0b/html5/thumbnails/2.jpg)
17 - 2Copyright 2003 Pearson Education Canada Inc.
Theacquisition and
payment cycle even- tually affects most as- pects of an account-ing system and af-
fects manyaccounts.
asse
tsliabilities expenses
![Page 3: 17 - 1 Copyright 2003 Pearson Education Canada Inc. CHAPTER 17 Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts](https://reader030.vdocuments.net/reader030/viewer/2022032600/56649daf5503460f94a9cb0b/html5/thumbnails/3.jpg)
17 - 3Copyright 2003 Pearson Education Canada Inc.
asse
tsHow are
assets affectedby the acquisi-tion and pay-ment cycle?
![Page 4: 17 - 1 Copyright 2003 Pearson Education Canada Inc. CHAPTER 17 Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts](https://reader030.vdocuments.net/reader030/viewer/2022032600/56649daf5503460f94a9cb0b/html5/thumbnails/4.jpg)
17 - 4Copyright 2003 Pearson Education Canada Inc.
asse
ts
How areassets affectedby the acquisi-tion and pay-ment cycle?
- assets are acquired for use or sale
property, plant, & equipment
inventory
![Page 5: 17 - 1 Copyright 2003 Pearson Education Canada Inc. CHAPTER 17 Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts](https://reader030.vdocuments.net/reader030/viewer/2022032600/56649daf5503460f94a9cb0b/html5/thumbnails/5.jpg)
17 - 5Copyright 2003 Pearson Education Canada Inc.
asse
ts
How areassets affectedby the acquisi-tion and pay-ment cycle?
- prepaid expenses are incurred
prepaidinsurance
prepaidrent
prepaidtaxes
![Page 6: 17 - 1 Copyright 2003 Pearson Education Canada Inc. CHAPTER 17 Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts](https://reader030.vdocuments.net/reader030/viewer/2022032600/56649daf5503460f94a9cb0b/html5/thumbnails/6.jpg)
17 - 6Copyright 2003 Pearson Education Canada Inc.
asse
ts
How areassets affectedby the acquisi-tion and pay-ment cycle?
- acquisitions even- tually require cash payment
![Page 7: 17 - 1 Copyright 2003 Pearson Education Canada Inc. CHAPTER 17 Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts](https://reader030.vdocuments.net/reader030/viewer/2022032600/56649daf5503460f94a9cb0b/html5/thumbnails/7.jpg)
17 - 7Copyright 2003 Pearson Education Canada Inc.
Howare liabilities
affected by theacquisition
and paymentcycle?
liabilities
![Page 8: 17 - 1 Copyright 2003 Pearson Education Canada Inc. CHAPTER 17 Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts](https://reader030.vdocuments.net/reader030/viewer/2022032600/56649daf5503460f94a9cb0b/html5/thumbnails/8.jpg)
17 - 8Copyright 2003 Pearson Education Canada Inc.
Howare liabilities
affected by theacquisition
and paymentcycle?
liabilities
Liabilities are affected whenassets or services are acquired
with a promise to pay ratherthan a payment.
![Page 9: 17 - 1 Copyright 2003 Pearson Education Canada Inc. CHAPTER 17 Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts](https://reader030.vdocuments.net/reader030/viewer/2022032600/56649daf5503460f94a9cb0b/html5/thumbnails/9.jpg)
17 - 9Copyright 2003 Pearson Education Canada Inc.
Howare expenses
affected by theacquisition and
paymentcycle?
expenses
![Page 10: 17 - 1 Copyright 2003 Pearson Education Canada Inc. CHAPTER 17 Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts](https://reader030.vdocuments.net/reader030/viewer/2022032600/56649daf5503460f94a9cb0b/html5/thumbnails/10.jpg)
17 - 10Copyright 2003 Pearson Education Canada Inc.
Howare expenses
affected by theacquisition and
paymentcycle?
expenses
Expenses are affected whengoods and services are acquiredand prepaid expenses are used.
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17 - 11Copyright 2003 Pearson Education Canada Inc.
Auditing Manufacturing EquipmentAuditing Manufacturing Equipment
![Page 12: 17 - 1 Copyright 2003 Pearson Education Canada Inc. CHAPTER 17 Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts](https://reader030.vdocuments.net/reader030/viewer/2022032600/56649daf5503460f94a9cb0b/html5/thumbnails/12.jpg)
17 - 12Copyright 2003 Pearson Education Canada Inc.
Auditing Manufacturing EquipmentAuditing Manufacturing Equipment
- perform analytical procedures examples: depreciation expense / equipment manufacturing costs / production
![Page 13: 17 - 1 Copyright 2003 Pearson Education Canada Inc. CHAPTER 17 Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts](https://reader030.vdocuments.net/reader030/viewer/2022032600/56649daf5503460f94a9cb0b/html5/thumbnails/13.jpg)
17 - 13Copyright 2003 Pearson Education Canada Inc.
Auditing Manufacturing EquipmentAuditing Manufacturing Equipment
- perform analytical procedures- verify current-year acquisitions
![Page 14: 17 - 1 Copyright 2003 Pearson Education Canada Inc. CHAPTER 17 Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts](https://reader030.vdocuments.net/reader030/viewer/2022032600/56649daf5503460f94a9cb0b/html5/thumbnails/14.jpg)
17 - 14Copyright 2003 Pearson Education Canada Inc.
Auditing Manufacturing EquipmentAuditing Manufacturing Equipment
- verify current-year acquisitions EXAMPLE PROCEDURES: Select a sample of entries in the acqui- sitions journal and trace to capital asset master file.
acquisitions journaldescription _ $$ _June 1, 2004Factory Equipment 5289
capital asset master description _ $$ _June 1, 2004Factory Equipment 5289
![Page 15: 17 - 1 Copyright 2003 Pearson Education Canada Inc. CHAPTER 17 Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts](https://reader030.vdocuments.net/reader030/viewer/2022032600/56649daf5503460f94a9cb0b/html5/thumbnails/15.jpg)
17 - 15Copyright 2003 Pearson Education Canada Inc.
Auditing Manufacturing EquipmentAuditing Manufacturing Equipment- verify current-year acquisitions EXAMPLE PROCEDURES: Select a sample of entries in the acqui- sitions journal and trace to vendor in- voices and receiving reports.
acquisitions journaldescription _ $$ _June 1, 2004Factory Equipment 5289
Ace CompanyRECEIVING
REPORTReceived onecase (count 200)BDY #2 pencilson 6/1/x0.Condition: OK
receiving employee
Big Machine Co.INVOICE
Thanks for buy-ing our BDY
model. Pleasepay $5,289by 6/15/04.
![Page 16: 17 - 1 Copyright 2003 Pearson Education Canada Inc. CHAPTER 17 Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts](https://reader030.vdocuments.net/reader030/viewer/2022032600/56649daf5503460f94a9cb0b/html5/thumbnails/16.jpg)
17 - 16Copyright 2003 Pearson Education Canada Inc.
Auditing Manufacturing EquipmentAuditing Manufacturing Equipment- verify current-year acquisitions EXAMPLE PROCEDURES: Select a sample of entries in the acqui- sitions journal and physically examine the related assets.
acquisitions journaldescription _ $$ _June 1, 2004Factory Equipment 5289
![Page 17: 17 - 1 Copyright 2003 Pearson Education Canada Inc. CHAPTER 17 Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts](https://reader030.vdocuments.net/reader030/viewer/2022032600/56649daf5503460f94a9cb0b/html5/thumbnails/17.jpg)
17 - 17Copyright 2003 Pearson Education Canada Inc.
Auditing Manufacturing EquipmentAuditing Manufacturing Equipment
- verify current-year acquisitions~Select a sample of entries in the acqui- sitions journal and trace to capital asset master file.~Select a sample of entries in the acqui- sitions journal and trace to vendor in- voices and receiving reports.~Select a sample of entries in the acqui- sitions journal and physically examine the related assets.
These 3 proceduresprimarily address the existence
of newly-acquired assets.
![Page 18: 17 - 1 Copyright 2003 Pearson Education Canada Inc. CHAPTER 17 Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts](https://reader030.vdocuments.net/reader030/viewer/2022032600/56649daf5503460f94a9cb0b/html5/thumbnails/18.jpg)
17 - 18Copyright 2003 Pearson Education Canada Inc.
Auditing Manufacturing EquipmentAuditing Manufacturing Equipment- verify current-year acquisitions
~Select a sample of entries in the acqui- sitions journal and trace to capital asset master file.~Select a sample of entries in the acqui- sitions journal and trace to vendor in- voices and receiving reports.~Select a sample of entries in the acqui- sitions journal and physically examine the related assets.
What proceduresaddress the completenessof newly-acquired assets?
![Page 19: 17 - 1 Copyright 2003 Pearson Education Canada Inc. CHAPTER 17 Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts](https://reader030.vdocuments.net/reader030/viewer/2022032600/56649daf5503460f94a9cb0b/html5/thumbnails/19.jpg)
17 - 19Copyright 2003 Pearson Education Canada Inc.
Auditing Manufacturing EquipmentAuditing Manufacturing Equipment- verify current-year acquisitions
~Select a sample of entries in the acqui- sitions journal and trace to capital asset master file.~Select a sample of entries in the acqui- sitions journal and trace to vendor in- voices and receiving reports.~Select a sample of entries in the acqui- sitions journal and physically examine the related assets.
To addresscompleteness of newly-acquiredassets, reverse the direction of
these procedures.
![Page 20: 17 - 1 Copyright 2003 Pearson Education Canada Inc. CHAPTER 17 Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts](https://reader030.vdocuments.net/reader030/viewer/2022032600/56649daf5503460f94a9cb0b/html5/thumbnails/20.jpg)
17 - 20Copyright 2003 Pearson Education Canada Inc.
acquisitions journaldescription _ $$ _June 1, 2004Factory Equipment 5289
Big Machine Co.INVOICE
Thanks for buy-ing our BDY
model. Pleasepay $5289by 6/15/03.
~Select a sample of entries in the acqui- sitions journal and trace to vendor in- voices and receiving reports.
To addresscompleteness of newly-acquiredassets, reverse the direction of
these procedures.Example: Select a sample of receiving reports andtrace to vendor invoices and the acquisitions journal.
Ace CompanyRECEIVING REPORT
Received one BDYmachine on 6/1/04.Condition: OK
receiving employee
![Page 21: 17 - 1 Copyright 2003 Pearson Education Canada Inc. CHAPTER 17 Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts](https://reader030.vdocuments.net/reader030/viewer/2022032600/56649daf5503460f94a9cb0b/html5/thumbnails/21.jpg)
17 - 21Copyright 2003 Pearson Education Canada Inc.
Auditing Manufacturing EquipmentAuditing Manufacturing Equipment
- perform analytical procedures- verify current-year acquisitions- verify current-year disposals
![Page 22: 17 - 1 Copyright 2003 Pearson Education Canada Inc. CHAPTER 17 Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts](https://reader030.vdocuments.net/reader030/viewer/2022032600/56649daf5503460f94a9cb0b/html5/thumbnails/22.jpg)
17 - 22Copyright 2003 Pearson Education Canada Inc.
Auditing Manufacturing EquipmentAuditing Manufacturing Equipment
- verify current-year disposals ~ review whether newly-acquired assets replace existing assets
![Page 23: 17 - 1 Copyright 2003 Pearson Education Canada Inc. CHAPTER 17 Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts](https://reader030.vdocuments.net/reader030/viewer/2022032600/56649daf5503460f94a9cb0b/html5/thumbnails/23.jpg)
17 - 23Copyright 2003 Pearson Education Canada Inc.
Auditing Manufacturing EquipmentAuditing Manufacturing Equipment
- verify current-year disposals ~ review whether newly-acquired assets replace existing assets ~ analyze gains on the disposal of as- sets and miscellaneous income for receipts from asset disposals
ForSale
![Page 24: 17 - 1 Copyright 2003 Pearson Education Canada Inc. CHAPTER 17 Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts](https://reader030.vdocuments.net/reader030/viewer/2022032600/56649daf5503460f94a9cb0b/html5/thumbnails/24.jpg)
17 - 24Copyright 2003 Pearson Education Canada Inc.
Auditing Manufacturing EquipmentAuditing Manufacturing Equipment
- verify current-year disposals ~ review whether newly-acquired assets replace existing assets ~ analyze gains on the disposal of as- sets and miscellaneous income for receipts from asset disposals ~ review plant modifications and changes in product line, taxes, or in- surance coverage for indications of deletions of equipment
![Page 25: 17 - 1 Copyright 2003 Pearson Education Canada Inc. CHAPTER 17 Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts](https://reader030.vdocuments.net/reader030/viewer/2022032600/56649daf5503460f94a9cb0b/html5/thumbnails/25.jpg)
17 - 25Copyright 2003 Pearson Education Canada Inc.
Auditing Manufacturing EquipmentAuditing Manufacturing Equipment
- verify current-year disposals ~ analyze gains on the disposal of as- sets and miscellaneous income for receipts from asset disposals ~ review plant modifications and changes in product line, taxes, or in- surance coverage for indications of deletions of equipment ~ make enquiries of management and production personnel about disposals
![Page 26: 17 - 1 Copyright 2003 Pearson Education Canada Inc. CHAPTER 17 Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts](https://reader030.vdocuments.net/reader030/viewer/2022032600/56649daf5503460f94a9cb0b/html5/thumbnails/26.jpg)
17 - 26Copyright 2003 Pearson Education Canada Inc.
Auditing Manufacturing EquipmentAuditing Manufacturing Equipment
- perform analytical procedures- verify current-year acquisitions- verify current-year disposals- verify ending asset balances
![Page 27: 17 - 1 Copyright 2003 Pearson Education Canada Inc. CHAPTER 17 Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts](https://reader030.vdocuments.net/reader030/viewer/2022032600/56649daf5503460f94a9cb0b/html5/thumbnails/27.jpg)
17 - 27Copyright 2003 Pearson Education Canada Inc.
Auditing Manufacturing EquipmentAuditing Manufacturing Equipment
- perform analytical procedures- verify current-year acquisitions- verify current-year disposals- verify ending asset balances
how?
![Page 28: 17 - 1 Copyright 2003 Pearson Education Canada Inc. CHAPTER 17 Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts](https://reader030.vdocuments.net/reader030/viewer/2022032600/56649daf5503460f94a9cb0b/html5/thumbnails/28.jpg)
17 - 28Copyright 2003 Pearson Education Canada Inc.
Auditing Manufacturing EquipmentAuditing Manufacturing Equipment
- verify ending asset balances
general ledger account _ $$ _Fixed Assets 875289
capital asset master description _ $$ _Total Fixed Assets 875289
EXAMPLE PROCEDURE: Trace totalsfrom capital asset master file to the general ledger.
![Page 29: 17 - 1 Copyright 2003 Pearson Education Canada Inc. CHAPTER 17 Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts](https://reader030.vdocuments.net/reader030/viewer/2022032600/56649daf5503460f94a9cb0b/html5/thumbnails/29.jpg)
17 - 29Copyright 2003 Pearson Education Canada Inc.
Auditing Manufacturing EquipmentAuditing Manufacturing Equipment
- perform analytical procedures- verify current-year acquisitions- verify current-year disposals- verify ending asset balances- verify amortization expense
![Page 30: 17 - 1 Copyright 2003 Pearson Education Canada Inc. CHAPTER 17 Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts](https://reader030.vdocuments.net/reader030/viewer/2022032600/56649daf5503460f94a9cb0b/html5/thumbnails/30.jpg)
17 - 30Copyright 2003 Pearson Education Canada Inc.
Auditing Manufacturing EquipmentAuditing Manufacturing Equipment
- verify amortization expense
What is the auditor’s
greatest concernregarding amort-
ization expense?
![Page 31: 17 - 1 Copyright 2003 Pearson Education Canada Inc. CHAPTER 17 Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts](https://reader030.vdocuments.net/reader030/viewer/2022032600/56649daf5503460f94a9cb0b/html5/thumbnails/31.jpg)
17 - 31Copyright 2003 Pearson Education Canada Inc.
Auditing Manufacturing EquipmentAuditing Manufacturing Equipment
- verify depreciation expenseWhat is the
auditor’s greatest concern re-garding amortization expense?
accuracy
![Page 32: 17 - 1 Copyright 2003 Pearson Education Canada Inc. CHAPTER 17 Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts](https://reader030.vdocuments.net/reader030/viewer/2022032600/56649daf5503460f94a9cb0b/html5/thumbnails/32.jpg)
17 - 32Copyright 2003 Pearson Education Canada Inc.
Auditing Manufacturing EquipmentAuditing Manufacturing Equipment
- verify amortization expense
What audit procedures addressthe auditor’s concern regarding accu-
racy of amortization expense?
![Page 33: 17 - 1 Copyright 2003 Pearson Education Canada Inc. CHAPTER 17 Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts](https://reader030.vdocuments.net/reader030/viewer/2022032600/56649daf5503460f94a9cb0b/html5/thumbnails/33.jpg)
17 - 33Copyright 2003 Pearson Education Canada Inc.
Auditing Manufacturing EquipmentAuditing Manufacturing Equipment
- verify amortization expense
What audit procedures addressthe auditor’s concern regarding accu-
racy of amortization expense?
- recalculate amortization expense
![Page 34: 17 - 1 Copyright 2003 Pearson Education Canada Inc. CHAPTER 17 Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts](https://reader030.vdocuments.net/reader030/viewer/2022032600/56649daf5503460f94a9cb0b/html5/thumbnails/34.jpg)
17 - 34Copyright 2003 Pearson Education Canada Inc.
Auditing Manufacturing EquipmentAuditing Manufacturing Equipment
- verify amortization expense
What audit procedures addressthe auditor’s concern regarding accu-
racy of amortization expense?
- recalculate amortization expense- determine whether the client’s amortiz- ation policy is consistent
![Page 35: 17 - 1 Copyright 2003 Pearson Education Canada Inc. CHAPTER 17 Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts](https://reader030.vdocuments.net/reader030/viewer/2022032600/56649daf5503460f94a9cb0b/html5/thumbnails/35.jpg)
17 - 35Copyright 2003 Pearson Education Canada Inc.
Auditing Manufacturing EquipmentAuditing Manufacturing Equipment- perform analytical procedures- verify current-year acquisitions- verify current-year disposals- verify ending asset balances- verify amortization expense- verify ending accumulated amortization balances
![Page 36: 17 - 1 Copyright 2003 Pearson Education Canada Inc. CHAPTER 17 Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts](https://reader030.vdocuments.net/reader030/viewer/2022032600/56649daf5503460f94a9cb0b/html5/thumbnails/36.jpg)
17 - 36Copyright 2003 Pearson Education Canada Inc.
Auditing Manufacturing EquipmentAuditing Manufacturing Equipment
- verify ending accumulated amortization balances
What audit procedures addressthe auditor’s concern regarding accu-
racy of accumulated amortization ?
![Page 37: 17 - 1 Copyright 2003 Pearson Education Canada Inc. CHAPTER 17 Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts](https://reader030.vdocuments.net/reader030/viewer/2022032600/56649daf5503460f94a9cb0b/html5/thumbnails/37.jpg)
17 - 37Copyright 2003 Pearson Education Canada Inc.
What audit procedures addressthe auditor’s concern regarding accu-
racy of accumulated amortization ?
general ledger account _ $$ _Accumulated Amortization 75289
capital asset master description _ $$ _Total Accum. Amortization 75289
Trace totals from capital assetmaster file to the general
ledger.
![Page 38: 17 - 1 Copyright 2003 Pearson Education Canada Inc. CHAPTER 17 Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts](https://reader030.vdocuments.net/reader030/viewer/2022032600/56649daf5503460f94a9cb0b/html5/thumbnails/38.jpg)
17 - 38Copyright 2003 Pearson Education Canada Inc.
What audit procedures addressthe auditor’s concern regarding accu-
racy of accumulated amortization?
recalculateaccumulatedamortization
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17 - 39Copyright 2003 Pearson Education Canada Inc.
Auditing Prepaid Expenses and Auditing Prepaid Expenses and Other AssetsOther Assets
organizationcosts
prepaidrent
prepaidtaxes
prepaidinsurance
patents
trade-marks
deferredcharges
copy-rights
![Page 40: 17 - 1 Copyright 2003 Pearson Education Canada Inc. CHAPTER 17 Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts](https://reader030.vdocuments.net/reader030/viewer/2022032600/56649daf5503460f94a9cb0b/html5/thumbnails/40.jpg)
17 - 40Copyright 2003 Pearson Education Canada Inc.
patents
organizationcosts
prepaidrent
prepaidtaxes
prepaidinsurance
trade-marks
deferredcharges
copy-rights
What audit proce-dures are appropriate for
a prepaid expense?
Auditing Prepaid Expenses and Auditing Prepaid Expenses and Other AssetsOther Assets
![Page 41: 17 - 1 Copyright 2003 Pearson Education Canada Inc. CHAPTER 17 Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts](https://reader030.vdocuments.net/reader030/viewer/2022032600/56649daf5503460f94a9cb0b/html5/thumbnails/41.jpg)
17 - 41Copyright 2003 Pearson Education Canada Inc.
What audit proce-dures are appropriate for
a prepaid expense?
- perform analytical procedures EXAMPLES: ~ compare prepaid expense and the related expense account to prior years ~ compare prepaid expense / related expense account to prior years
![Page 42: 17 - 1 Copyright 2003 Pearson Education Canada Inc. CHAPTER 17 Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts](https://reader030.vdocuments.net/reader030/viewer/2022032600/56649daf5503460f94a9cb0b/html5/thumbnails/42.jpg)
17 - 42Copyright 2003 Pearson Education Canada Inc.
What audit proce-dures are appropriate for
a prepaid expense?
- perform analytical procedures- examine documentation and other evi- dence supporting the existence and completeness of prepaid expenses
![Page 43: 17 - 1 Copyright 2003 Pearson Education Canada Inc. CHAPTER 17 Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts](https://reader030.vdocuments.net/reader030/viewer/2022032600/56649daf5503460f94a9cb0b/html5/thumbnails/43.jpg)
17 - 43Copyright 2003 Pearson Education Canada Inc.
What audit proce-dures are appropriate for
a prepaid expense?
- perform analytical procedures- examine documentation and other evi- dence supporting the existence and completeness of prepaid expenses- recalculate prepaid expenses and trace to the general ledger
![Page 44: 17 - 1 Copyright 2003 Pearson Education Canada Inc. CHAPTER 17 Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts](https://reader030.vdocuments.net/reader030/viewer/2022032600/56649daf5503460f94a9cb0b/html5/thumbnails/44.jpg)
17 - 44Copyright 2003 Pearson Education Canada Inc.
What audit proce-dures are appropriate for
a prepaid expense?
- examine documentation and other evi- dence supporting the existence and completeness of prepaid expenses- recalculate prepaid expenses and trace to the general ledger - determine whether the expense related to the prepaid expense is properly classified
![Page 45: 17 - 1 Copyright 2003 Pearson Education Canada Inc. CHAPTER 17 Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts](https://reader030.vdocuments.net/reader030/viewer/2022032600/56649daf5503460f94a9cb0b/html5/thumbnails/45.jpg)
17 - 45Copyright 2003 Pearson Education Canada Inc.
What audit proce-dures are appropriate for
a prepaid expense?
- recalculate prepaid expenses and trace to the general ledger - determine whether the expense related to the prepaid expense is properly classified- determine whether prepaid expense transactions are recorded in the proper period
![Page 46: 17 - 1 Copyright 2003 Pearson Education Canada Inc. CHAPTER 17 Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts](https://reader030.vdocuments.net/reader030/viewer/2022032600/56649daf5503460f94a9cb0b/html5/thumbnails/46.jpg)
17 - 46Copyright 2003 Pearson Education Canada Inc.
What audit proce-dures are appropriate for
a prepaid expense?
- determine whether the expense related to the prepaid expense is properly classified- determine whether prepaid expense transactions are recorded in the proper period- determine whether prepaid expenses are properly presented and disclosed
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17 - 47Copyright 2003 Pearson Education Canada Inc.
Auditing Accrued LiabilitiesAuditing Accrued Liabilities
accruedbonuses
accruedcommis-
sions
accruedtaxes
accruedinterest
accruedpayroll
accruedpension
costs
accruedprofessional
fees
accruedrent
accruedwarranty
costs
![Page 48: 17 - 1 Copyright 2003 Pearson Education Canada Inc. CHAPTER 17 Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts](https://reader030.vdocuments.net/reader030/viewer/2022032600/56649daf5503460f94a9cb0b/html5/thumbnails/48.jpg)
17 - 48Copyright 2003 Pearson Education Canada Inc.
Auditing Accrued LiabilitiesAuditing Accrued Liabilities
accruedbonuses
accruedcommis-
sions
accruedtaxes
accruedinterest
accruedpayroll
accruedpension
costs
accruedprofessional
fees
accruedrent
accruedwarranty
costs
What audit proce-dures are appropriate for
an accrued liability?
![Page 49: 17 - 1 Copyright 2003 Pearson Education Canada Inc. CHAPTER 17 Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts](https://reader030.vdocuments.net/reader030/viewer/2022032600/56649daf5503460f94a9cb0b/html5/thumbnails/49.jpg)
17 - 49Copyright 2003 Pearson Education Canada Inc.
What audit proce-dures are appropriate for
an accrued liability?
The audit proceduresappropriate for accruedliabilities are similar to
those appropriate for pre-paid expenses, depending
on the client.
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17 - 50Copyright 2003 Pearson Education Canada Inc.
Auditing OperationsAuditing Operations
![Page 51: 17 - 1 Copyright 2003 Pearson Education Canada Inc. CHAPTER 17 Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts](https://reader030.vdocuments.net/reader030/viewer/2022032600/56649daf5503460f94a9cb0b/html5/thumbnails/51.jpg)
17 - 51Copyright 2003 Pearson Education Canada Inc.
Auditing OperationsAuditing Operations- perform analytical procedures
![Page 52: 17 - 1 Copyright 2003 Pearson Education Canada Inc. CHAPTER 17 Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts](https://reader030.vdocuments.net/reader030/viewer/2022032600/56649daf5503460f94a9cb0b/html5/thumbnails/52.jpg)
17 - 52Copyright 2003 Pearson Education Canada Inc.
Auditing OperationsAuditing Operations- perform analytical procedures- perform tests of controls
![Page 53: 17 - 1 Copyright 2003 Pearson Education Canada Inc. CHAPTER 17 Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts](https://reader030.vdocuments.net/reader030/viewer/2022032600/56649daf5503460f94a9cb0b/html5/thumbnails/53.jpg)
17 - 53Copyright 2003 Pearson Education Canada Inc.
Auditing OperationsAuditing Operations- perform analytical procedures- perform tests of controls- perform an analysis of account balances
![Page 54: 17 - 1 Copyright 2003 Pearson Education Canada Inc. CHAPTER 17 Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts](https://reader030.vdocuments.net/reader030/viewer/2022032600/56649daf5503460f94a9cb0b/html5/thumbnails/54.jpg)
17 - 54Copyright 2003 Pearson Education Canada Inc.
Auditing OperationsAuditing Operations- perform analytical procedures- perform tests of controls- perform an analysis of account balances- perform tests of details of balance sheet accounts
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17 - 55Copyright 2003 Pearson Education Canada Inc.
Auditing OperationsAuditing Operations- perform analytical procedures- perform tests of controls- perform an analysis of account balances- perform tests of details of balance sheet accounts- perform tests of allocations