View:
Sorted by:
Using Sampling to Test Account Balances During an Audit
You can use sampling to test the strength of a client’s internal controls, but you also use sampling to test account balances. The full name for this process in auditing lingo is sampling for substantive [more…]
What to Look for When You Audit Revenue
Revenue is important to the audit because it’s one of the two major business processes. (Purchasing is the other.) It’s also the major account in which you look for instances of financial misstatements [more…]
Using the Accrual Method to Record Revenue During an Audit
When you perform an audit, you check a company’s revenue recognition, which has to reconcile with generally accepted accounting principles (GAAP). This means, in most cases, that the straight-out accrual [more…]
Following the Flow of Revenue In an Audit
You can’t effectively or efficiently audit your client’s revenue transactions unless you understand how the client handles them. Each client you audit will probably approach each of the business processes [more…]
Assessing the Inherent Risk of Selling Goods and Services
When performing an audit, you look at revenue transactions. As the auditor you need to factor in any inherently risky circumstances that affect the revenue accounts. Generally, you look at four inherent [more…]
Confirming Accounts Receivable During an Audit
A major auditing issue with accounts receivable is whether the amount reflected in the customer’s subsidiary ledger reconciles with the correct customer balance. When you audit accounts receivable, you [more…]
Spotting Business Financial Statement Fraud
Financial statement fraud, commonly referred to as "cooking the books," involves deliberately overstating assets, revenues, and profits and/or understating liabilities, expenses, and losses. A business [more…]
How to Prevent Employee Fraud
Businesses lose huge sums of money each year to fraud committed by their employees. Small businesses and large businesses alike must establish strong internal controls to prevent employee fraud, whether [more…]
Forensic Accounting For Dummies Cheat Sheet
Most of the time, forensic accounting is used when someone commits fraud. For this reason, forensic accountants are often referred to as fraud investigators [more…]
How Companies Classify Expenses
Your audit client’s expenses are all the costs it incurs while keeping its business open. Most likely, these costs are a combination of expenses you find very familiar, such as telephone and utilities, [more…]
How Companies Make Purchases
As an auditor you have to assess the purchasing procedures your client uses. An important part of the purchasing process is — no surprise! — paying for the purchase. Businesses and individuals alike have [more…]
Examining Purchase Procedures for Risk
At every step of an audit, you have to consider risks and their associated controls. Normally, purchases don’t have a lot of inherent risk because the process doesn’t involve any complicated or contentious [more…]
How to Assess Control Risk in Your Client’s Purchasing Procedures
When assessing purchasing control risk, auditors assume that control risk is directly affected by purchasing internal controls set in place by the business. The purchases process has control risk associated [more…]
How to Test Cash Disbursement Transactions
During your audit, you need to test management financial statement assertions. When you test cash disbursements during an audit, your first job is to figure out how your audit client pays its invoices. [more…]
Audit Procedures: Monitoring Personnel Records
Making sure your audit client is current with all areas of human resources-related compliance is one way to judge the competency of employees when you’re deciding whether to limit audit procedures. So [more…]
How to Test Payroll Expense Transactions
During an audit, testing payroll transactions includes sniffing out employees paid who shouldn’t have been and making sure valid employees are paid the correct amount. Auditors also need to make sure the [more…]
How to Test Employee Payroll Taxes
One way auditors test employee payroll-related items is to make sure the related employer expenses are properly accounted for on the books. It’s the auditor’s responsibility during the audit to sample [more…]
How to Examine Human Resources Risks and Controls
At every step of an audit, you have to consider risks and their associated controls. Generally, you look at three inherent human resources risk factors: the supply and demand of competent employees, existing [more…]
Three Ways Error and Fraud Can Exist in Payroll
When you assess a client’s payroll control risk during your audit, remember that the control risk is directly impacted by payroll internal controls set in place by the business. A company can introduce [more…]
How to Detect Errors and Fraud in Payroll
If payroll fraud exists, it is likely to occur in one of three ways: During an audit you can use the following methods to detect all three circumstances of payroll error and fraud: through paying fictitious [more…]
How to Test Accrued Payroll Liabilities
Making sure the company books its payroll accruals properly is fairly easy. By the time you conduct your audit, all employees whose unpaid payroll transactions should have been accrued have been paid. [more…]
Handling Inventory Audits for Manufacturing Firms
If your audit client manufactures items, it doesn’t have a merchandise inventory. Manufacturers have three other types of inventory you need to know how to handle as an auditor. These three types are as [more…]
How Inventory Systems Work
To perform an audit, you have to know how your client handles inventory. Knowledge about different inventory systems helps you to plan and execute an effective and efficient audit. Two major types of inventory [more…]
Auditing Valuing Ending Inventory Systems
Depending on the method your audit client uses for value ending inventory, the amount transferred from the balance sheet inventory account to the income statement cost of goods sold can vary wildly. Your [more…]
What to Look for When Auditing Inventory
The primary reason auditors observe their client taking the physical inventory is to make sure the inventory reflected on the balance sheet actually exists and that the balance sheet includes all inventory [more…]
