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Caf 09: Mnemonics: Audit & Assurance

This document provides various mnemonics and acronyms to help remember important concepts in auditing. It includes acronyms for internal control components, financial statement assertions, sources of audit evidence, fundamental ethics principles, threats to independence, control objectives, control procedures, and standard audit procedures.

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hassan malik
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623 views5 pages

Caf 09: Mnemonics: Audit & Assurance

This document provides various mnemonics and acronyms to help remember important concepts in auditing. It includes acronyms for internal control components, financial statement assertions, sources of audit evidence, fundamental ethics principles, threats to independence, control objectives, control procedures, and standard audit procedures.

Uploaded by

hassan malik
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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1|Page Audit & Assurance

CAF 09: MNEMONICS


 Internal Controls Components-CRIME
C-Control activities
R-Risk assessment
I-Information system
M-Monitoring of controls
E-Environment control

 FINANCIAL STATEMENTS ASSERTIONS: - ACCA COVER


A-Accuracy
C-Completeness
C-Cut off
A-Allocation
C-Classification
O-Occurrence
V-Valuation
E-Existence
R-Rights and Obligations

 SOURCES OF EVIDENCE: AEIOR


A-Analytical Procedures
E-Enquiry and Confirmation
I-Inspection
O-Observation
R-Recalculation and Performance

 ETHICS – FUNDAMENTAL PRINCIPLES:- OPPIC


O-Objectivity
P-Professional Behavior
P-Professional competence
I-Integrity
C-Confidentiality

Prepared By | AKASH BACHAN


2|Page Audit & Assurance

 ETHICS – THREATS :- ASSIF


A-Advocacy
S-Self interest
S-Self review
I-Intimidation
F-Familiarity

 ETHICS – INDICATORS OF THREATS: - FULL STOP


F-Friends and family
U-Undue fee dependence
L-Loans to/from
L-Litigation
S-Shares in clients
T-Taking gifts and hospitality
O-Overdue fees
P-Provision to the other services

 Control objectives: - A STOP


A-Accuracy
S- Safeguarding asset
T-Timing reporting
O-Orderly efficient business conduct
P-Prevention fraud or non-compliance of law

 Control procedures: - CARCAP


C-Comparison
A-Authorization
R-Reconciliations
C-Computer controls
A-Arithmetical
P-Physical

 Evaluation of expert’s work: CCO


C-Competent ?
C-Capable ?
O-Objective?

Prepared By | AKASH BACHAN


3|Page Audit & Assurance

 Mitigating factors—Auditor is required to consider mitigating factors in


managements plans when they believe there is substantial doubt about an entity’s
ability to continue as a going concern—“BIDS”
B- Borrow more money or restructure debt
I- Increase ownership equity
D- Delay or reduce expenditures
S- Sell assets or liquidate

 Auditors responsibility for subsequent events—perform the following procedures—


“PRIME”
P- Post balance sheet transactions: review proper cutoff and to better evaluate year-
end balances
R- Representation letter should be obtained from management regarding whether
any events occurred during the subsequent period that require adjustments to or
disclosures in the financial statements
I – Inquiry of management of whether any subsequent events effect the F/S
M- Minutes of stockholders, directors, and other committee meetings should be read
during the subsequent period
E- Examine latest available interim financial statements; compare them with F/S’s
under audit

 Assessing the Risks of Material Misstatement—perform series of steps—“IM A CPA”


I- Internal control—obtain and understanding of the entity and its environment,
including its internal control
M- Material misstatement—assess the risks of material misstatement
A- Assessed level of risk—respond to the assessed level of risk by designing further
audit procedures based on this assessment
C- Controls testing—test internal controls to evaluate their operating effectiveness
P- Perform substantive procedures
A- Audit evidence—evaluate the sufficiency and appropriateness of audit evidence
obtained

Prepared By | AKASH BACHAN


4|Page Audit & Assurance

 Review Requirements—“U LIAR CPA”


U- Understanding with client
L- Learn/obtain sufficient knowledge of entity’s business
I- Inquiries should be addressed to appropriate individuals/ inside management
A- Analytical procedures should be performed
R- Review—other procedures should be performed
C- Client representations letter should be obtained from management
P- Professional judgment should be used to evaluate results
A- Accountant should communicate results

 Existing control activities—control policies and procedures—“PAID TIPS”


P- Pre-number documents
A- Authorization of transactions
I- Independent checks to maintain asset accountability
D- Documentation
T- Timely and appropriate performance reviews
I- Information processing controls
P- Physical controls for safeguarding assets
S- Segregation of duties

 Documentation—the auditor must document the understand of the design and


implementation of the entity’s internal controls—“FIND”
F- Flowchart—depicts auditors understanding of I.C. system use for complex structure
I- Internal control questionnaire or checklist
N- Narrative use for less complex control structures
D- Documentation from the client, including copies of the entity’s procedures manuals
and organizational charts

Prepared By | AKASH BACHAN


5|Page Audit & Assurance

 Standard Auditing Procedures—used in every audit as risk assessment procedures,


tests of controls, or substantive tests—“FIVE CARROT CARS”
F- Footing, cross-footing, and recalculation
I- Inquiry
V- Vouching back from F/S to supporting documents existence/occurrence
E- Examination/inspection
C- Confirmation
A- Analytical Procedures
R- Reperformance
R- Reconciliation
O- Observation
T- Tracing forward from source documents to accounting records completeness
C- Cutoff Review
A- Auditing related accounts simultaneously
R- Representation letter at end of fieldwork
S- Subsequent events review

 Contingencies from litigation, claims or assessments may arise from—“GAPPI”


G- Guarantees of the indebtedness of others
A- Actual or possible claims and assessments
P- Product warranties
P- Pending and threatened litigation
I- Income tax disputes

Prepared By | AKASH BACHAN

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