Auditing Principles 3, Analytic procedures, audit documentation, substantive procedures, sources of information, audit evidence, audit for cash, test cash, bank reconciliation, check kiting, test of control, audit approach, revenue and collection cycle, assertion, sales and receivables, revenue recognition, collection account receivables, goods and services, billing customers, audit cycle, josecintron.com, Advance Business Consulting, mba4help.com, Auditing Principles 3, Analytic procedures, audit documentation, substantive procedures, sources of information, audit evidence, audit for cash, test cash, bank reconciliation, check kiting, test of control, audit approach, revenue and collection cycle, assertion, sales and receivables, revenue recognition, collection account receivables, goods and services, billing customers, audit cycle, josecintron.com, Advance Business Consulting, mba4help.com, Auditing Principles 3, Analytic procedures, audit documentation, substantive procedures, sources of information, audit evidence, audit for cash, test cash, bank reconciliation, check kiting, test of control, audit approach, revenue and collection cycle, assertion, sales and receivables, revenue recognition, collection account receivables, goods and services, billing customers, audit cycle, josecintron.com, Advance Business Consulting, mba4help.com

1. Auditing Principles
Jose Cintron, MBA-CPC
jose@mba4help.com
Http://josecintron.com
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2. Analytical Procedures
Auditors can evaluate financial statement accounts by studying and
comparing relationships among financial and nonfinancial data. The
methods of study and comparison are known as analytical procedures.
Auditors are required to use them when planning the audit and when
performing the final review of the financial statements before the audit
report is issued.
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3. Analytical Procedures
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4. Audit Documentation
Audit documentation provides the auditors' record of compliance with
generally accepted auditing standards. The documentation (usually in the
form of either electronic files or hard copy workpapers) should contain
support for the decisions regarding planning and performing the audit,
procedures performed, evidence obtained, and conclusions reached.
Even though the auditors legally own the audit documentation,
professional ethics require that the files not be transferred without
consent of the client because of the confidential information recorded in
them.
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5. Substantive procedures
during the audit of cash.
THE AUDIT OF CASH
Describe the types of substantive procedures that are conducted during
the audit of cash.
The first procedure in an audit of cash is to obtain the entity-prepared
bank reconciliations and audit them, focusing on some of the reconciling
items discussed in the preceding section. In a well-functioning control
environment, auditors should never have to perform the company's
internal control activity of preparing the bank reconciliation.
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6. AUDIT EVIDENCE USED TO TEST CASH
Cash Receipts Journal
The cash receipts journal contains all of the detailed entries for all
receipts of cash by the entity (debits to the cash account), including cash
deposits. It contains the population of credit entries that should be
reflected in the credits to accounts receivable for customer payments. It
also contains the adjusting and correcting entries that can result from the
bank account reconciliation.
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7. AUDIT EVIDENCE USED TO TEST CASH
Cash Disbursements Journal
The cash disbursements journal is the company's checkbook. It contains
all detailed entries for checks written during the period being audited
(cash disbursements). Because all cash disbursements (other than those
from a petty cash account) should be made via check or electronic
transfer, the cash disbursements journal contains the cash credit entries
that provide a population for testing cash disbursements.
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8. AUDIT EVIDENCE USED TO TEST CASH
Bank Reconciliations
The company's bank reconciliation is the primary document used to test
the cash balance in the financial statements. The amount of cash in the
bank is almost always different from the amount in the general ledger
(financial statements), and the reconciliation is designed to explain the
difference between these two amounts. In addition, a bank account
reconciliation that compares the book cash balance to the bank cash
balance provides management with an opportunity to monitor the
separation of duties for cash receipts and cash disbursements as well.
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9. Bank Reconciliation
When auditing the bank reconciliation, the auditor should begin by
confirming the account balance listed as the “balance per bank” on the
top of the bank reconciliation for each bank account from each bank that
the client utilizes in the business. A confirmation letter is required to be
sent by the auditor and received in the mail directly back from each bank
at the offices of the public accounting firm.
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10. Balance in the bank
Once the “balance in the bank” has been confirmed and cross-referenced
to the balance in the bank reconciliation, the following additional
procedures are typically used in auditing the bank reconciliation:
Verify the mathematical accuracy of the reconciliation, including the
listing of outstanding checks and deposits in transit.
Examine reconciling items to ensure they are appropriately classified
(e.g., that they were legitimate outstanding checks that were written but
not paid by the bank at the statement date).
Agree the book balance to the trial balance, which has been traced to the
general ledger.
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11. Characteristic signs of
check-kiting schemes
Frequent deposits and checks in rounded and the same amounts.
Frequent deposits with checks written on the same (other) banks.
Short time lags between deposits and withdrawals.
Frequent ATM account balance inquiries.
Large periodic balances in individual accounts with no apparent
business explanation.
Low average balance compared to high level of deposits.
Many checks made payable to other banks.
Banks' willingness to pay against uncollected funds.
“Cash” withdrawals with deposit checks drawn on another bank.
Checks drawn on foreign banks with lax banking laws and regulations
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12. AUDIT EVIDENCE USED TO TEST CASH
Canceled Checks
Describes the information found on a typical check. Whether the auditor
examines the actual check or a scanned image obtained from the
bank, knowledge of the codes for Federal Reserve
districts, offices, states, and bank identification numbers could enable an
auditor to spot a crude check forgery. A forger's mistakes with the
optional identification printing or the magnetic check number might
provide a tip-off. If the amount of a check is altered after it has cleared
the bank, the alteration would be noted by comparing the magnetic
imprint of the amount paid to the amount written on the check face.
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13. The reverse side of a
check carries the
endorsement(s) of the
payees and holders in
due course; the date
and the name and
routing number of the
bank where the check
was deposited; and
the date clearing.
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14. AUDIT EVIDENCE USED TO TEST CASH
Individuals engaging in fraudulent schemes involving cash often try to
conceal their crimes by removing canceled checks they made payable to
themselves or endorsed on the back with their own names. Missing
canceled checks are a red flag. However, many banks no longer return
the canceled checks to their customers. Instead, they send photocopies of
the front of the checks. While this information is sufficient for
reconciling an account, it does not provide the information that may
assist a company or auditor in detecting or investigating possible frauds.
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15. AUDIT EVIDENCE USED TO TEST CASH
Bank Statements
Most of the information shown on the bank statement is self-explanatory.
However, auditors should not overlook the usefulness of some of the
information: the number and dollar amount of deposits and checks can be
compared to the detail data on the bank statement; the account holder's
federal business identification number is on the statement, and this can
be used in other databases; and the statement itself can be studied for
alterations.
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16. Test of control cash
disbursement
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17. AUDIT APPROACH-REVENUE
AND COLLECTION CYCLE
Approach for using the audit risk model to plan an engagement:
Set audit risk at desired levels (normally, low).
1.Assess risk of material misstatement, which incorporates inherent risk
based on the nature of the account balance or class of transactions and
control risk based on gaining an understanding of internal control.
2.Remember that audit standard 240 requires consideration of revenue as
a fraud risk and documentation if the auditors conclude that revenue is
not a fraud risk.
3.Determine detection risk based on the level of audit risk and risk of
material misstatement.
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18. Assertions for sales and receivables
with their relative risks.
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19. Relative Assertion Risks for
Revenue and Receivables
After considering the inherent risk associated with each assertion, the
auditors identify important control activities implemented by the client
for each relevant assertion. Once the control activities have been
determined to be in place through inquiry, observation, and
walkthrough, auditors estimate the control risk. Based on the combined
inherent and control risk assessments (referred to as the risk of material
misstatement), auditors calculate detection risk and determine the
nature, timing, and extent of evidence to gather by substantive
procedures.
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20. Relative Assertion Risks for
Revenue and Receivables
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21. Revenue Recognition
An entity's revenue-earning activities involve delivering or producing
goods, rendering services, or performing other activities that constitute
its ongoing major or central operations, and revenues are considered to
have been earned when the entity has substantially accomplished what it
must do to be entitled to the benefits represented by the revenues
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22. Revenue Recognition
Similarly, the SEC believes that revenue generally is realized or
realizable and earned when all of the following criteria are met:
Persuasive evidence of an arrangement exists.
Delivery has occurred or services have been rendered.
The seller's price to the buyer is fixed or determinable.
Collectability is reasonably ensured.
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23. Collectability of Accounts Receivable
Collectability of Accounts Receivable
In most companies, a portion of accounts receivable will not be paid.
GAAP requires the client to provide an estimate of the amount that will
likely be uncollectable and provide an allowance for this amount.
Estimation of the allowance for doubtful accounts can be subjective and
difficult for the client and the auditor. This is particularly true when the
client has changed products or its customer base, so there is little
experience on which to base estimates. Changing economic conditions
also make it difficult to estimate collectability.
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24. REVENUE AND COLLECTION CYCLE
The basic activities in the revenue and collection cycle are
(1) receiving and processing customer orders, including credit approval;
(2) delivering goods and services to customers;
(3) billing customers and accounting for accounts receivable;
(4) collecting and depositing cash received from customers.
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25. Delivering Goods and
Services to Customers
Physical custody of inventory goods starts in the storeroom or warehouse
where inventory is kept. Custody is transferred to the shipping
department upon the authorization of the shipping order that permits the
inventory clerk to release goods to the shipping department. Proper
authorization is important: Employees performing each of these steps
should sign transfer documents so they are held accountable. This control
procedure prevents employees from misappropriating the goods or
shipping product to friends without billing them. A bill of lading is a
form that the carrier signs to verify the goods are shipped. A packing slip,
which describes the goods being shipped, is often included with the
shipment.
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26. Billing Customers
Accounts Receivable
When a delivery or shipment is complete, the system finishes the
transaction by filing a shipment record and preparing a final invoice for
the customer (which is recorded as sales revenue and accounts
receivable). A sales invoice is the bill sent to the customer that indicates
the amount due. Any person who has the power to enter or alter these
transactions or to change the invoice before it is mailed to the customer
should not have any authorization, custody, or recording responsibilities.
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27. Plan de Auditoria –
Ciclo de Ventas
Costo de Ventas
Otorgamiento de
Crédito
Ajustes a Facturas
Orden de Compra
- Cliente
Ingreso del dinero
Cobranzas
Facturación
Cuentas por
Cobrar
Descuentos
Despacho de
mercancía
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28. Asientos Contables
Involucrados
Ventas
Pasivo /
Impuestos
sobre Ventas
Costo de
Ventas
Comisiones
en Ventas
Caja
Provisión /
Ctas.
Incobrables
Devoluciones
o Descuentos
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29. Documentos
Orden de
Compra
Orden de
Venta
Guía de
Embarque
Factura
Notas de
Crédito
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Avisos de
Cobro
Recibos
de Caja

30. Bases de Datos
Lista de
Clientes
E/C
Bancarios
Lista de
Precios
Data
Diario de
Ventas
Ordenes
Pendientes
Estadísticas
de Ventas
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31. Enlace con otros Ciclos
Inventario
Compras
Ventas
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32. Available presentations
Social media marketing
Internet Marketing
Facebook
Twitter
LinkedIn
YouTube
Blogger
Google pay per click
Yahoo pay per click
Facebook pay per click
LinkedIn pay per click
Email marketing
Search Engine Optimization
Business
Google
Reputation Management
Social media press release
SEO-Website optimization
Local Directories
Business Plan
Business Startup
SMM strategies
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