Time | Project Work Step | Initial | Index |
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| Review the CTB account checklist to ensure that each account on the TB is assigned to someone for reconciliation. |
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| Cash |
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| Analytical Procedures: General & Review of Cash Management System - Compare the balance of each significant cash and cash equivalent account with the comparable balance for the preceding period. Investigate significant or unusual fluctuations.
- Obtain an understanding of the client's cash management system and the business purposes of the practices involved. Document this information in a memorandum.
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| Tests of Bank Reconciliations - Obtain a copy of client-prepared bank reconciliations.
- Test clerical accuracy.
- Tie bank balance per reconciliation to bank statement, bank confirm, and to lead schedule or trial balance.
- Obtain a list of outstanding checks for selected accounts.
- Clerically test list of checks and compare the list to the bank reconciliation.
- Scan each list for unusual amounts (e.g., round amounts, repetitive amounts, unreasonably large amounts, etc.). List any such items for further investigation.
- Test completeness of the outstanding checklist through review of the month bank statement, noting inclusion of all checks written prior to period-end and clearing in subsequent period.
- Investigate any long outstanding checks. Determine whether an adjustment is necessary.
- Verify significant deposits in transit by tracing the amounts to the subsequent bank statement. Investigate any unusual delays in the credit of such amounts by the bank.
- Review the reconciliations for any large or unusual items. Investigate other reconciling items (e.g., bank errors, deposit corrections, bank charges, returned checks, etc.).
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| Other Procedures - Inquire of management as to the existence of any cash restrictions as of the balance sheet date. For restrictions identified, determine if the funds should be classified separately, with appropriate disclosures made in the financial statements.
- Inquire of management if any checks were held as of period-end. Determine whether they have been properly included in cash and A/P balances.
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| Accounts Receivable (A/R) |
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| Analytical Procedures - Compare the balance of each significant receivable account with the comparable balance for the preceding period. Investigate significant or unusual fluctuations.
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| Tests of the A/R Aged Report - Obtain the Aged A/R Report as of (Specific Date). Note that the report must be run as of that date, as the system cannot go back in time. Clerically test the A/R Aged Report on a scope basis.
- Scan the Aged Report for large/unusual balances or amounts (e.g., credit balances, amounts due from related parties, etc.). Investigate and examine supporting documentation, as appropriate.
- Test aging of individual invoices on a scope basis. Review invoices, noting invoice numbers and dates. Determine if invoices are categorized in appropriate aging categories.
- Compare aging statistics with those of prior periods. Investigate significant trends or fluctuations.
- Obtain reconciliation of A/R Aged Report to the G/L. Clerically test reconciliation and review supporting documentation for significant or unusual reconciling items. SCOPE: >$X
- Sum total credit balances. Propose re-class if above scope.
- Sum total amounts due from related parties for elimination in consolidation.
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| Evaluation of the Adequacy of the Allowance For Doubtful Accounts - Evaluate the following items and their impact on our review of the adequacy of the allowance for doubtful accounts. Document in a memorandum your findings related to:
- Changes in the client's credit and collection policies that have occurred during the audit period, including changes that have since been reversed or modified
- Impact of new products or new markets and whether they involve a different, higher-risk customer
- General economic conditions and trends adversely affecting the client's customers
- Have the client prepare an analysis (roll forward) of the allowance for doubtful accounts for the current audit period. Verify the clerical accuracy of the analysis and test it as follows:
- Cross-reference the provision for the current period to the appropriate expense lead schedule.
- Compare the provision, write-offs, recoveries and the ending balance for the current period with the comparable amounts for the preceding audit period. Investigate significant or unusual fluctuations.
- Test write-offs during the current period as follows:
- Review the listing of accounts written off and reconcile the totals with the amounts charged to the allowance for doubtful accounts.
- Determine whether proper approvals were obtained for selected write-offs.
- Have the client prepare a listing of individual large and/or past due receivables for specific review of their probable collectability. SCOPE: > $X & X days and all other balances > $X
- Relate the totals of individual receivables listed to the client's aging of receivables. Ensure that significant past due receivables are not omitted from the listing.
- Trace subsequent cash receipts to the cash records and examine remittance advices.
- Discuss the accounts with informed client personnel to obtain additional background information.
- Identify a range of specific allowances required for the total individual receivables reviewed.
- Based upon the review of the aging and historical write-off statistics, identify a range of general allowances required for receivables not specifically reviewed above.
- Summarize the results of the specific and general review of the collectability of receivables and determine an acceptable range of adequacy of the allowance for doubtful accounts. Adjust the identified range for other factors identified above that influence the collectability of receivables.
- Compare the balance of the allowance for doubtful accounts as of the balance sheet date with the acceptable range determined above. Propose an adjustment, as appropriate, to ensure that the allowance falls within the acceptable range.
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| Receivables From Related Parties - Identify receivables from officers, directors and principal shareholders and determine whether they arise from routine transactions, such as regularly settled travel advances, or are related-party transactions.
- Consider the collectability of receivables from officers, directors, principal shareholders and other related parties during the review of the adequacy of the allowance for doubtful accounts.
- Consider the need to disclose the transactions and balances. Propose disclosure points, as appropriate. Determine proper classification. Prepare confirmations if applicable.
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| Prepaids and Other Assets |
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| General - Review balances for reasonableness and obtain explanations for any significant variations between periods.
- Vouch individual amounts greater than $X.
- Conclude on appropriate objectives for prepaids and other asset accounts.
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| Fixed Assets |
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| Tests of Existence - Tour the client's plant facilities and observe the type and condition of property in place. Note any excess, unusable or idle facilities.
- Obtain an understanding of the client's policies, procedures and controls for performing physical inventories of property (e.g., frequency or criteria for determining the need for a physical inventory).
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| Tests of Fixed Asset Additions - Discuss with appropriate client personnel the approval process as it relates to additions to property.
- Obtain fixed asset register from corporate. Clerically test. Trace beginning balances to the working papers for the prior period and tie ending balances to the G/L control accounts.
- Review detail of property additions and retirements during the period at each individual location. Note that the descriptions indicated for property additions appear to describe items that are properly capitalizable under the client's accounting policies and relate to the client's business.
- Vouch and/or observe additions at individual locations and note approval by the appropriate levels of authority. SCOPE: All additions > $X.
- Determine that the total cost of any plant and equipment purchased on an installment plan or held under capital lease agreements is reflected in the asset accounts and that the unpaid obligations are accrued as liabilities.
- Determine whether old equipment traded in or replaced by the new units has been removed from the accounts.
- Inquire of appropriate client personnel as to the existence of significant commitments for the purchase of property items as of the balance sheet date. Consider the need to disclose such commitments in the financial statements.
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| Accounts Payable (A/P) |
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| Analytical Procedures - Compare the balance of each significant A/P account with the comparable balance for the preceding period. Consider the reasonableness of differences in light of changes in the level of operations.
- Obtain the A/P Detail report as of (Date). Note that the report must be run as of that date as the system cannot go back in time. Clerically test the A/P Aged Report.
- Scan the report for large/unusual balances or amounts (e.g., negative balances, round amounts, amounts due to related parties, etc.). Investigate and examine supporting documentation, as appropriate.
- Obtain reconciliation of A/P Aged Report to the G/L. Clerically test reconciliation and review supporting documentation for significant or unusual reconciling items. SCOPE: $X
- Sum total negative balances. Propose re-class if above scope.
- Sum total amounts due from related parties for elimination in consolidation.
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| Accrued Liabilities |
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| Analytical Procedures - Compare the balance of each significant accrued liabilities account with the comparable balance for the preceding period. Investigate significant or unusual fluctuations.
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| Detail Tests of Accrued Fringe Benefits - Obtain an understanding of the client's vacation and holiday pay policies. Review written policies and discuss with management compliance with the policies.
- Test calculation of accruals for vacation and holiday pay. Ensure completeness of accrual through review of the payroll register. Compare with similar calculations for the preceding period. Investigate significant differences.
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| Suspense and Clearing Accounts |
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| - Review suspense account and clearing account G/L balances for reasonableness and obtain explanations for any significant variations between periods.
- Vouch individual amounts greater than $X.
- Conclude on appropriate objectives for suspense and clearing asset accounts.
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