Auditing a Business

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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…]

How to Assess Inherent Inventory Management Risks

At every step of an audit, you have to consider risks and their associated controls. At this inventory stage, your focus is on identifying risks that exist in the inventory management process and the internal [more…]

How to Assess Inventory Management Control Risk

When you assess a client’s inventory management control risk during your audit, remember that the business’s internal controls directly affect that risk. The inventory management process has control risk [more…]

Testing Inventory Transactions

After you test inventory and verify that your audit client is following its standards, you’re ready to start testing management assertions. For inventory transactions you test these five management assertions [more…]

Including Tangible Assets in an Audit

When you perform an audit of a company, you have to account for that company’s tangible assets. You can find your audit client’s property, plant, and equipment in the asset section of its balance sheet [more…]

How to Check Depreciation Calculations

There are a few different ways that your audit client might use to figure depreciation. In addition to understanding depreciation accounting methods, when doing an audit, you need to know the following [more…]

How to Deal with the Disposal of Fixed Assets

In the normal course of doing business, an audit client will rid itself of unneeded fixed assets by selling them, trading them in as partial payments on new fixed assets, or [more…]

Handling Unpurchased Assts in an Audit

Auditing purchased assets is relatively easy, because you can test most management assertions by looking at the purchase source documents. But what about assets that aren’t purchased? Here are three examples [more…]

How to Deal with Intangible Assets During an Audit

Intangible assets differ from the other assets on your audit client’s balance sheet because they don’t have a physical presence and aren’t financial instruments like cash. However, like fixed assets, their [more…]

Checking Amortization Calculations in an Audit

As an auditor, you have to check the company’s intangible assets and that means understanding amortization. Amortization spreads the cost of an intangible asset over its expected useful life. Much like [more…]

How to Classify Contingent Liabilities

As you perform your audit, you have to determine how important a contingent liability is to the audit. A contingent liability can come in three categories, and the category it falls into gives you guidance [more…]

How to Recognize Contingent Liabilities During an Audit

Knowing what a contingent liability is and how to handle it is great, but suppose the client doesn’t tell you it has contingent liabilities? To protect the good name of your CPA firm you need to find all [more…]

Long-Term Debt that Impacts an Audit

Companies, like individuals, have long-term debt. To perform an audit, you need to understand the forms a company’s long-term debt can take and the debt-related issues you need to consider when conducting [more…]

How to Review Capital Stock Accounts

When you are auditing stockholder equity, you want to look at the capital stock accounts. Capital stock includes all paid-in capital. The board of directors has to approve all capital stock transactions [more…]

Following Long-Term Debt Audit Procedures

As an auditor, your primary objective is to make sure all your client’s legitimate obligations are properly recognized on its financial statements. Here are three tasks auditors must perform when examining [more…]

Stockholders’ Equity Issues in Auditing

Stockholders’ equity represents the claim that the corporation’s shareholders have to the company’s net assets. As an auditor you have to account for net assets. Stockholders’ equity has three common components [more…]

Examining the Company Charter When Auditing Stockholders’ Equity

Your first task when reviewing your audit client’s stockholder equity transactions is to double-check the terms of the corporate charter. The corporate charter contains pertinent facts about the corporation [more…]

Confirming Transactions When Auditing Stockholder Equity

When performing an audit of stockholder equity, you will want to verify the transactions with an independent registrar, who can confirm that all stockholders’ equity transactions are authorized by a company’s [more…]


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