[AUD] Paybles, Long-term Debt, Owners Equity

Payables

 

Confirmation, Completeness

sometimes omitted(not GAAP)

sent to major suppliers, disputed accounts

sample from a list of vendors, confirm zero balance

 

Unrecorded liabilities, Completeness

vendor's invoices and statement(YE, after YE)

subsequent cash disbursement

subsequent unpaid bills test

unopened mail for a reasonable period of time after YE

 

Long-term Debt

 

Average Loan Balance + Interest Expense

 analytical procedure: compare interest expense with bond payable

 

- Bank confirmation: unrecorded debt, completeness

- Bond premium/discount: recalculate

- Bond trust indenture: client not violate any covenants

- Debt agreement: pledged asset and event causing default(restriction by borrow), presentation and disclosure

 

Owner's equity

Control over capital stock transaction(test of details of transaction)

- Inspecting stock certificate book

  stubs: remain after a certificate has been removed, outstanding shares, par value

- Confirmation from a stock registrar and a stock transfer agent

  The number of shares authorized, issued, and outstanding 

stock registrar	stock transfer agent
verify authorization of BOD	record + stock ownership

 

 

Income Statement

BS accounts	IS accounts
Accounts Receivable	Sales	Analytical procedure	unusual big Sales at YE> cut off
Note receivable	Interest	Recalculate
Investments	interest, dividends, gain on Sales	Recalculate
PPE	Rent, gain on Sales	Recalculate
Accounts Receivable	uncollectible accounts(bad debt exp)	Analytical procedure
Inventories	Purchases, CGS, payroll(direct labor)	Analytical procedure
PPE	Depreciaton, repairs and maintenance	Recalculate Analytical procedure
Accrued liabilities	commissions, fees, warranty exp	Analytical procedure

* Analytical procedure: unusual fluctuation

 

Statement of cash flows

reconciling the amount in the BS, IS