AUDITING & ATTESTATION – 4

TIP PIE ACDO = Evidence

Review:
Strong Internal Control

P – Pre-numbered Documents
A – Authorization of Transactions
I – Independent Checks
D – Documentation
T – Timely and Appropriate Performance Reviews
I – Information Processing Controls
P – Physical Controls
S – Segregation of Duties

Management Assertions:

C – Completeness
P – Proper period cut-off
A – Accuracy
C – Classification
O – Occurrence
C – Completeness
A – Allocation and Valuation
R – Rights and Obligations
E – Existence

About

C – Completeness
U – Understandability and Classification
R – Rights, Obligations, and Occurrence
V – Valuation and accuracy

ed assertions
Substantive Testing:

N – Nature
E – Extent
T – Timing

Transaction Cycles:
Cycle: Description
1. Revenue: includes sales revenues, receivables, and cash receipts
2. Expenditure: Includes purchases, payables, and cash disbursements
3. Payroll and Personnel: Includes payroll (salaried and hourly) and personnel functions
4. Inventory and Production: Includes perpetual inventory, physical counts, and manufacturing
costs
5. Property, Plant, and Equipment: includes acquisitions and disposals and related depreciation
expense
6. Investments: includes investments, related interest and dividend payments, proceeds from
issuance and from payments of principal,

and payments for treasury stock

7. Other Liabilities: includes accrued liabilities, warranty costs, deferred income taxes, and lease
obligations
Revenue Cycle: includes sales revenues, receivables, and cash receipts
Vouch downBiggest concern is overstatement of revenue.
Sales
 Preparation of the Sales Order:Paid Tips (Pre-numbered)
1) Receipt of a customer purchase order by the sales department
2) A serially numbered sales order is prepared and sent to the credit department for approval
 Credit Approval: Valuation assertion and Authority
1) Decides if the customer may receive goods on open account = Authority
2) If approved, copy of approved sales order is sent to shipping department, billing department,
and the accounting department