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18 Cards in this Set
- Front
- Back
What is a transaction cycle?
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A group of homogeneous transactions
Homogeneous means - the same kind |
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A bulk of a company's economic activities can be grouped into a few categories called what?
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Transaction cycles
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Within a given category of transactions, what is true about control risk?
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It is constant
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What is meant by control risk being constant within a group of homogeneous transactions?
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That all transactions within that category are Processed subject to the same configuration of internal control policies and procedures.
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What are the 6 major transaction cycles?
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A. Revenue/receipts
B.Expenditures/disbursements C. Payroll D. Inventory, especially manufactured inventory (since purchased inventory would be similar to expenditures/disbursements as presented here) E. Fixed assets F. Investing/financing |
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What is the acronym to use as a tool to analyze the audit considerations of internal control policies and procedures in each transaction cycle?
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SCARE
Internal controls in each transaction cycle should SCARE! |
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What does the acronym SCARE mean?
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(1) Segregation of duties,
(2) Comparisons, (3) Access, (4) Records, and (5) Execution of transactions. |
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How does the SAS concerning specific transactions describe control activities?
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In terms of 4 specific considerations:
(1) authorization; (2) segregation of duties; (3) safeguarding assets; and (4) asset accountability. |
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What does segregation of duties mean?
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Separating "incompatible functions" to the extent possible, subject to cost-benefit considerations.
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Give an example of a Segregation of Duties.
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The same employee should not normally:
Authorize (execute), Have access, and Perform accounting activities in the ordinary course of duties. |
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What certain Comparisons should be made?
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1. Comparing actual assets on hand to what the accounting records indicate
2. Comparing related accounting documents on a timely basis for consistency |
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By making certain comparisons, what is established?
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Proper asset accountability!
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Give an example of comparing related accounting documents on a timely basis for consistency.
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Before paying a vendor's invoice, someone should verify that the goods reflected on that invoice agree with what was received per the receiving report, which agrees with the entity's purchase order
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Access to assets and important accounting documents should be limited to whom?
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Authorized personnel
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The Access concept compares to the what two SAS control activities?
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1. Safeguarding assets
2. Asset accountability |
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Having adequate records and documentation supports what two control activities?
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1. Recordkeeping
2. Asset accountability |
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In specific transaction cycles, how what is the concept of Excecution?
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Transactions should be recorded as management authorized
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Authorization is the same concept as what concept under SCARE?
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Excecution
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