Small Business Accounting

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How Businesses Use Cash Accounts

From an auditing standpoint, cash is an important account because cash transactions affect all other business and financial processes. Businesses acquire cash by selling goods or services, disposing of [more…]

Auditing a Company’s Interest-Bearing Bank Accounts

Some accounts can accrue interest. As an auditor, you need to keep track of these accounts as well as cash and investment accounts. Keep in mind that all interest income from all bank accounts must be [more…]

Auditing a Company’s Investment Accounts

When performing an audit you have to account for all of your client’s assets. Not all assets are tangible objects or cash sitting in the bank. Many companies sell their own securities [more…]

How to Examine Risks Related to Liquid Assets

At every step of an audit, you have to consider risks and their associated controls. It’s important to consider risks and controls to make sure your audit effectively and efficiently guides you toward [more…]

Assessing Controls Related to Cash

When you assess an auditing client’s cash control risk, remember that control risk is directly affected by the internal controls the company has set in place. Cash is a risky account because the money [more…]

Monitoring the Frequency of Deposits and Account Balances

While you’re interviewing the audit client, find out about its sources of cash and how often it makes bank deposits. If an audit client — especially a retail client or one receiving a preponderance of [more…]

How to Check Bank Reconciliations

Your audit client will prepare bank reconciliations, which compare and adjust its cash balance per its bank statements with its book cash balances. When you audit the bank reconciliations, you must make [more…]

How to Test Investments

As an auditor you have to test security investments such as your client’s stocks and bonds. Testing investments during an audit is no different from testing any other financial account, such as cash. You [more…]

Practicing Due Diligence in Auditing

After you finish auditing all your client’s business and financial processes, you must perform due diligence before you issue your audit report. Due diligence [more…]

Assessing Events After the Balance Sheet Date

As an auditor, you must address all relevant events that take place after the balance sheet date but before you issue your report. For example, your audit client may be breathing a sigh of relief because [more…]

How to Sleuth for Subsequent Events

When performing due diligence in an audit, you have to address all relevant events that take place after the balance sheet date but before you issue your report. These are called subsequent events and [more…]

Identifying Subsequent Events That Require Disclosure

As you are performing due diligence in your audits, you take subsequent events into account. There are three Type II events that you should investigate to determine whether you need to disclose in the [more…]

Finding Material Changes to Debt or Equity

If your audit client has material debt or equity transactions after the balance sheet date, you must disclose the debt or equity in your audit report as well. This type of subsequent event may include [more…]

How to Find Contingent Liabilities

All auditors must know what a contingent liability is and how to handle it, but suppose your audit client doesn’t tell you it has contingent liabilities? What can you do to protect the good name of your [more…]

How to Assess Going-Concerns

You initially evaluate going-concern when deciding to accept a company as an audit client. You reevaluate the client’s ability to continue as a going-concern as you wrap up the audit. The term [more…]

What to Include in an Unqualified Audit Report

Auditors issue an unqualified report after they gather sufficient competent evidence and conduct the audit according to generally accepted auditing standards [more…]

How to Determine When an Unqualified Audit Report Isn’t Sufficient

Three circumstances may preclude you from issuing an unqualified report when you complete your audit. For example, if your client limits what actions you can take and what records you can look at, and [more…]

Types of Audit Reports You Can Issue Besides Unqualified

If for some reason, you can’t issue an unqualified report when you complete your audit, you still need to create a report. Three reporting options are available to auditors: the qualified report, the disclaimer [more…]

Issuing Reports When GAAP Aren’t Used

Some auditing clients don’t follow Generally Accepted Accounting Principles (GAAP). Some companies — usually smaller, private ones — may use a cash or tax basis instead. Companies that are highly regulated [more…]

Testing the Reliability of Documents

Part of an auditor’s job for a client can include verifying company documents. Attestation is a subset of assurance services that focuses on whether your engagement’s subject matter complies with the applicable [more…]

Conducting Compliance Audits

The purpose of compliance audits is to see how well a company is following applicable rules, policies, and regulations. For example, as an internal auditor your job may be to see how well various departments [more…]

Auditing Prepaid Expenses and Deferred Charges

As an auditor you have to pay attention to all of a company’s assets. Prepaid expenses and deferred charges appear on a company’s balance sheet as other assets [more…]

Examining Inherent Risks of Fixed Assets

At every step of an audit, you have to consider risks of misstatement and their associated controls. When you are auditing assets, be sure to focus is on identifying risks in the fixed-asset management [more…]

Assessing Fixed-Asset Control Risk

When auditing a company’s assets, don’t forget to take a look at asset control risk features the company has in place. During your audit you can perform tests of internal controls to limit the number of [more…]

Testing Transaction Assertions During an Audit

During your audit, you need to test management financial statement assertions for fixed and intangible asset transactions. The six assertions that you must attend to when auditing — occurrence, ownership [more…]

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