Shared Flashcard Set

Details

Acct 407 - Exam 1
Chapter 7
16
Accounting
Undergraduate 4
04/03/2010

Additional Accounting Flashcards

 


 

Cards

Term
general rules of revenue recognition
Definition
realized/realizable and earned
Term
SAB104
Definition
1. pervasive evidence of arrangement exists (contract) 2. delivery has occurred/service rendered 3. seller's price is fixed or determinable 4. collectibility is reasonably assured
Term
Revenue Procces
Definition
pg 260 in book. examine; won't have to recreate
Term
4 inherent risks of revenue recognition
Definition
1. improper revenue recognition 2. returns and allowances 3. collectibility of receivables 4. lapping
Term
3 types of improper revenue recognition (a type of inherent risk)
Definition
1. cutoff 2. bill and hold 3. channel stuffing
Term
lapping (a type of inherent risk)
Definition
borrowing from A to pay B
Term
For revenue recognition, should auditors presume that there is a risk of material misstatement due to fraud?
Definition
Yes, SAS 99 says so. Ctrls should be in place.
Term
11 internal controls over revenue cycle
Definition
1. control customers' orders with segregation of duties 2. approve credit prior to sale 3. control and use prenumbered documents 4. control access to assets 5. clerical accuracy checks on invoices 6. control billing 7. use of control listing of cash receipts 8. adjusting for sales and receivables 9. use of chart of accounts and review of account codings 10. reconciling AR subsidiary ledger to GL as an independent check 11. use of budgets and analysis of variances
Term
should AR be confirmed?
Definition
yes. only when material unless they would be ineffective. if IR and CR are low and can apply good substantive procedures, don't have to confirm
Term
what assertions do confirms address?
Definition
existence/occurrence. NOT valuation
Term
5 factors likely to affect the reliability of confirms
Definition
1. previous audit experience 2. intended recipient of the confirmation 3. type of info being confirmed 4. the auditor may confirm entire balances or individual transactions 5. type of confirmations being sent
Term
3 types of confirmations
Definition
1. positive 2. negative 3. blank
Term
how do auditors handle uncollectible accounts?
Definition
1. inspect customer files for collectibility (payment history) 2. recalc ABD exp 3. verify collection attempts
Term
how do auditors handle sales cutoff?
Definition
1. examine sales invoices and shipping docs shortly prior to and after year end 2. examine returns after yearend
Term
what sort of analytical procedures can be used in the audit of AR?
Definition
1. sales revenue (compare with previous periods and industry) 2. ABD as % of sales and of gross receivables 3. AR (ARTO)
Term
2 inherent risks of
Definition
Supporting users have an ad free experience!