Financial Audit Manual VOLUME 2 July 2008_part8 doc

Substantive Testing 921 B - Example Account Risk Analysis for Fund Balance with Treasury July 2008 GAO/PCIE Financial Audit Manual Page 921 B-3 Entity: ___________________________________ Date of Financial Statements: _________________ Line Item: Fund Balance with Treasury Preparer: ____________________ Date__________ ACCOUNT RISK ANALYSIS FORM Reviewer: ____________________ Date__________ File Ref: PLANNING PHASE INTERNAL CONTROL PHASE TESTING PHASE Account Name Balance Financial statement assertions Inherent, fraud, and control risk factors Cycle/ accounting application Effectiveness of control activities 1 Control risk Com- bined risk Timing I/F Nature & extent Doc ref & audit step Valuation/Accuracy Fund Balance with Treasury is not recorded accurately. No significant inherent, fraud or control risk factors identified. Cycles : Revenue Payroll Budget Treasury Applications: FBWT Cash receipts Cash disbursements I/F Test FBWT reconciliations. Analyze impact of unresolved reconciling items at year- end. (insert) (insert) This is trial version www.adultpdf.com Substantive Testing 921 B - Example Account Risk Analysis for Fund Balance with Treasury July 2008 GAO/PCIE Financial Audit Manual Page 921 B-4 Entity: ___________________________________ Date of Financial Statements: _________________ Line Item: Fund Balance with Treasury Preparer: ____________________ Date__________ ACCOUNT RISK ANALYSIS FORM Reviewer: ____________________ Date__________ File Ref: PLANNING PHASE INTERNAL CONTROL PHASE TESTING PHASE Account Name Balance Financial statement assertions Inherent, fraud, and control risk factors Cycle/ accounting application Effectiveness of control activities 1 Control risk Com- bined risk Timing I/F Nature & extent Doc ref & audit step Rights Entity does not have certain rights to Fund Balance with Treasury because of transfers, rescissions, and restrictions, or nonentity accounts. Inherent risk arises from the high number of appropriation, fund, and receipt accounts, including certain special funds and trust funds that do not belong to the entity. Because these nonentity accounts are maintained within the same system used to maintain entity accounts and financial activity, there is a risk that these accounts will be inappropriately charged and be included in the FBWT line item. Same control risks as for existence and completeness. Treasury F Review support for recorded appropriation, fund, and receipt accounts included in the FBWT line item. Review footnote disclosure. (insert) (insert) This is trial version www.adultpdf.com Substantive Testing 921 B - Example Account Risk Analysis for Fund Balance with Treasury July 2008 GAO/PCIE Financial Audit Manual Page 921 B-5 Entity: ___________________________________ Date of Financial Statements: _________________ Line Item: Fund Balance with Treasury Preparer: ____________________ Date__________ ACCOUNT RISK ANALYSIS FORM Reviewer: ____________________ Date__________ File Ref: PLANNING PHASE INTERNAL CONTROL PHASE TESTING PHASE Account Name Balance Financial statement assertions Inherent, fraud, and control risk factors Cycle/ accounting application Effectiveness of control activities 1 Control risk Com- bined risk Timing I/F Nature & extent Doc ref & audit step Presentation and disclosure Fund Balance with Treasury is not properly classified and disclosed in the financial statements. No significant inherent or fraud risk factors identified. Same control risks as for existence and completeness. Treasury F Review FBWT related financial statement line item and footnote disclosures for conformance with applicable standards, and trace amounts reported in financial statement line items and footnote disclosures to general ledger and supporting detailed records. (insert) This is trial version www.adultpdf.com Substantive Testing 921 B - Example Account Risk Analysis for Fund Balance with Treasury July 2008 GAO/PCIE Financial Audit Manual Page 921 B-6 [This page intentionally left blank.] This is trial version www.adultpdf.com Substantive Testing 921 C - Example Specific Control Evaluation for Fund Balance with Treasury Entity: ____________________ Date of Financial Statements: _____________ Accounting application: Fund Balance with Treasury SPECIFIC CONTROL EVALUATION Preparer: ________________ Date__________ (Line Item/Account-Related) Reviewer: ________________ Date: _________ File Ref: Page 1 of 6 July 2008 GAO/PCIE Financial Audit Manual Page 921 C-1 921 C - Example Specific Control Evaluation for Fund Balance with Treasury Relevant assertions in line items Accounting application assertions FBWT Various Potential misstatements in accounting application assertions Control objectives Internal control activities IS (Y/N) Effectiveness of control activities Doc ref. & control testing step Existence or Occurrence Existence Existence Substantiation 1. Recorded FBWT does not exist as of a given date. 1a. Recorded FBWT amounts should exist as of a given date. (See note 1.) 1. Entity staff performs monthly reconciliation between entity general ledger (G/L) and Treasury records (appropriation and receipt account ledgers via GWA). Y (insert) 2. Entity staff resolves receipt and disbursement differences reported by Treasury statements of differences via GWA for collections and disbursements. N (insert) This is trial version www.adultpdf.com Substantive Testing 921 C - Example Specific Control Evaluation for Fund Balance with Treasury Entity: ____________________ Date of Financial Statements: _____________ Accounting application: Fund Balance with Treasury SPECIFIC CONTROL EVALUATION Preparer: ________________ Date__________ (Line Item/Account-Related) Reviewer: ________________ Date: _________ File Ref: Page 2 of 6 July 2008 GAO/PCIE Financial Audit Manual Page 921 C-2 Relevant assertions in line items Accounting application assertions FBWT Various Potential misstatements in accounting application assertions Control objectives Internal control activities IS (Y/N) Effectiveness of control activities Doc ref. & control testing step 3. Entity staff resolves disbursement differences reported by Treasury for advice of check issued discrepancy report via GWA and difference notification to the disbursing office (NTDO entities). N (insert) 1b. Recorded FBWT, at a given date, should be supported by appropriate detailed records that are accurately summarized and reconciled to the account balance. 1. Entity staff reconciles the monthly Statement of Transactions (SF 224) submitted to Treasury, to the applicable G/L accounts. 2. Entity staff reconciles the monthly Statement of Ac- countability/transactions (SF1219/1220 or SF1218/ 1221) submitted to Treasury, to the applicable G/L accounts (NTDO entities). 3. Same as 1.1a.1 Y N Y (insert) (insert) (insert) This is trial version www.adultpdf.com Substantive Testing 921 C - Example Specific Control Evaluation for Fund Balance with Treasury Entity: ____________________ Date of Financial Statements: _____________ Accounting application: Fund Balance with Treasury SPECIFIC CONTROL EVALUATION Preparer: ________________ Date__________ (Line Item/Account-Related) Reviewer: ________________ Date: _________ File Ref: Page 3 of 6 July 2008 GAO/PCIE Financial Audit Manual Page 921 C-3 Relevant assertions in line items Accounting application assertions FBWT Various Potential misstatements in accounting application assertions Control objectives Internal control activities IS (Y/N) Effectiveness of control activities Doc ref. & control testing step 1c. Access to FBWT, critical forms, records, and processing and storage areas should be permitted only in accordance with laws, regulations, and management policy. 1. Not covered in this example. Note: For entities that disburse funds on their own behalf (NTDOs), and maintain cash and/or check stock on hand, auditors will need to document and test the effectiveness of the control activities in place. Completeness Complete- ness Complete- ness Account completeness 2. FBWT balance exists but is omitted from the financial statements. 2a. FBWT balance should be included in the financial statements. 1. Same as 1.1a.1, 1.1a.2, 1.1a.3. 2. Entity staff reconciles the FBWT line item crosswalk that includes all G/L FBWT accounts to the Treasury Appropriation and Receipt Trial Balances. N (insert) (insert) This is trial version www.adultpdf.com Substantive Testing 921 C - Example Specific Control Evaluation for Fund Balance with Treasury Entity: ____________________ Date of Financial Statements: _____________ Accounting application: Fund Balance with Treasury SPECIFIC CONTROL EVALUATION Preparer: ________________ Date__________ (Line Item/Account-Related) Reviewer: ________________ Date: _________ File Ref: Page 4 of 6 July 2008 GAO/PCIE Financial Audit Manual Page 921 C-4 Relevant assertions in line items Accounting application assertions FBWT Various Potential misstatements in accounting application assertions Control objectives Internal control activities IS (Y/N) Effectiveness of control activities Doc ref. & control testing step Valuation or allocation Valuation Valuation Accuracy 3. FBWT receipt and disbursement transactions are recorded incorrectly. 3a. FBWT transactions should be recorded accurately. 1. Same as 1.1a.1. 2. Same as 1.1a.2. 3. Same as 1.1a.3. Y N N (insert) (insert) (insert) Rights and obligations: Rights Rights Ownership 4. Recorded FBWT is owned by others. 4a. Entity should own recorded FBWT. 1. Entity staff reconciles Treasury appropriation warrants, appropriation rescissions, and nonexpenditure transfers to FBWT accounts. 2. Entity staff reconciles expenditure (cash receipts and disbursements) activity to the FBWT accounts. N N (insert) (insert) This is trial version www.adultpdf.com Substantive Testing 921 C - Example Specific Control Evaluation for Fund Balance with Treasury Entity: ____________________ Date of Financial Statements: _____________ Accounting application: Fund Balance with Treasury SPECIFIC CONTROL EVALUATION Preparer: ________________ Date__________ (Line Item/Account-Related) Reviewer: ________________ Date: _________ File Ref: Page 5 of 6 July 2008 GAO/PCIE Financial Audit Manual Page 921 C-5 Relevant assertions in line items Accounting application assertions FBWT Various Potential misstatements in accounting application assertions Control objectives Internal control activities IS (Y/N) Effectiveness of control activities Doc ref. & control testing step Rights 5. Entity does not have certain rights to recorded FBWT because of appropriation restrictions. 5a. Recorded FBWT should be entities’ rights at a given date. 1. Same as 4.4a.1. N (insert) Presentation and disclosure Disclosure Disclosure Account classification 6. FBWT is not properly classified and described in the financial statements. 6a. FBWT should be properly classified and described in the financial statements. 1. Entity staff reconciles Treasury Undisbursed Appropriation Account and Receipt Account trial balances to the G/L accounts. 2. The Chief Accountant reviews the FBWT account analysis and crosswalk to the FS against the Treasury Financial Management Supplement–U.S. Government Standard General Ledger (section V). N N (insert) (insert) This is trial version www.adultpdf.com Substantive Testing 921 C - Example Specific Control Evaluation for Fund Balance with Treasury Entity: ____________________ Date of Financial Statements: _____________ Accounting application: Fund Balance with Treasury SPECIFIC CONTROL EVALUATION Preparer: ________________ Date__________ (Line Item/Account-Related) Reviewer: ________________ Date: _________ File Ref: Page 6 of 6 July 2008 GAO/PCIE Financial Audit Manual Page 921 C-6 Relevant assertions in line items Accounting application assertions FBWT Various Potential misstatements in accounting application assertions Control objectives Internal control activities IS (Y/N) Effectiveness of control activities Doc ref. & control testing step Presentation Presentation Consistency 7. The financial state- ments components of FBWT are based on accounting principles different from those used in prior periods. 7a. FBWT should be based on accounting principles that are applied consistently from period to period. 1. The CFO, Reports and Analysis Branch Chief, and the Chief Accountant review the financial statements for consistently applied accounting principles. N (insert) Disclosure Disclosure Disclosure 8. Required information is not disclosed in the financial statements or in the footnotes thereto. 8a. The financial statements or footnotes thereto should contain all information required to be disclosed. 1. The CFO, Reports and Analysis Branch Chief, and the Chief Accountant review the financial statements for consistently applied accounting principles and required disclosure. N (insert) Note 1: The internal control activities 1.1a.1 and 1.1b.1 generally rely on system outputs that are dependent on IS general controls, which may be ineffective at some entities. (Tests of controls over entities’ general ledger systems should be included as part of computer control tests.) The control activity 1.1a.2 validates receipt and disbursement balances with Treasury records that are obtained from third parties (banks, Treasury regional finance centers, and other agencies). This is trial version www.adultpdf.com [...]... requirements set forth in the Treasury Financial Manual (TFM), Volume I, Part 2- Chapter 4700 (TFM 2- 4700), Agency Reporting Requirements for the Financial Report of the United States Government Beginning with fiscal year 20 06, the Statement of Social Insurance is to be presented as a basic financial statement in accordance with SFFAS Nos 25 , 26 , and 28 .25 TFM 2- 4700 requires entities to provide the... Substantive Procedures 941 - Auditing the Statement of Social Insurance [This page intentionally left blank.} July 20 08 This is trial version www.adultpdf.com GAO/PCIE Financial Audit Manual Page 941-10 SECTION 1000 Reporting This is trial version www.adultpdf.com FAM Volume 2 – Tools 1000 – Reporting [This page intentionally left blank.] July 20 08 GAO/PCIE Financial Audit Manual This is trial version... under Medicare Part D, which is also covered by SFFAS No 17 July 20 08 This is trial version www.adultpdf.com GAO/PCIE Financial Audit Manual Page 941 -2 Substantive Procedures 941 - Auditing the Statement of Social Insurance accordance with SFFAS No 28 , the effective period was deferred one year from fiscal year 20 05 to fiscal year 20 06 • SFFAS No 28 – Deferral of the Effective Date of Reclassification... The auditor should obtain separate management July 20 08 This is trial version www.adultpdf.com GAO/PCIE Financial Audit Manual Page 1001-1 Reporting 1001 – Management Representations representation letters from any component units for which the auditor will issue separate reports .05 The auditor should ask management to prepare the representation letter on the audited federal entity’s letterhead The auditor... Insurance: Amending SFFAS Nos 25 and 26 deferred the effective dates of SFFAS No 25 and SFFAS No 26 for one year to the fiscal year ended September 30, 20 06 .05 Auditors generally should follow the FAM methodology contained in the planning, internal control, testing, and reporting phases in FAM 20 0-500 and the audit guidance included in the AICPA’s Statement of Position (SOP) 04-1, Auditing the Statement... www.adultpdf.com GAO/PCIE Financial Audit Manual Page 941-4 Substantive Procedures 941 - Auditing the Statement of Social Insurance should use a separate materiality level(s) when planning and performing the audit of the Statement of Social Insurance and related disclosures (SOP 04-1, paragraph 22 ) .14 The auditor generally should establish planning materiality in relation to the element of the financial statements... balances, to determine the level of audit procedures required This is trial version www.adultpdf.com GAO/PCIE Financial Audit Manual Page 931 -2 Substantive Procedures 931 – Auditing Heritage Assets and Stewardship Land Audit Plan/Procedures 10 Heritage assets and stewardship land will vary by entity and auditors should use their professional judgment to design the audit plan/procedures for their particular... materiality, audit risks, and the internal control environment From fiscal years 20 06 through 20 08, as entities implement SFFAS No 29 , auditors may consider the example audit procedures provided below to audit this property, as well as a basis to develop new procedures Planning Phase 11 To obtain an understanding of entity heritage assets and stewardship land in the planning phase of the audit, the auditor... the proper period Audit Approach/Strategy 09 July 20 08 The auditor should develop their audit approach/strategy by identifying the extent of heritage assets and stewardship land at the entity they are auditing The auditor should then obtain and fully document their understanding of this property in the entity’s accounts, accounting systems, and related policies and procedures The auditor should also... representations and July 20 08 This is trial version www.adultpdf.com GAO/PCIE Financial Audit Manual Page 1001 -2 Reporting 1001 – Management Representations would not apply to those representations not directly related to amounts in the financial statements (such as responsibility for the statements) Representations Relating to the Financial Statements 08 AU 333.06 lists management representations that the auditor . version www.adultpdf.com Substantive Procedures 931 – Auditing Heritage Assets and Stewardship Land July 20 08 GAO/PCIE Financial Audit Manual Page 931-8 For periods beginning after September 30, 20 08 (FY 20 09): • Inclusion. Testing 921 B - Example Account Risk Analysis for Fund Balance with Treasury July 20 08 GAO/PCIE Financial Audit Manual Page 921 B-4 Entity: ___________________________________ Date of Financial. Testing 921 B - Example Account Risk Analysis for Fund Balance with Treasury July 20 08 GAO/PCIE Financial Audit Manual Page 921 B-5 Entity: ___________________________________ Date of Financial