Controls in Existence for Transaction Related Audit Objectives

CONTROLS IN EXISTENCE FOR TRANSACTION RELATED AUDIT OBJECTIVES Audit Objective Occurrence – The property included in the asset list actually exists. Controls The supervisor loads the assets from SAP to PTR. A separate person prepares the tax return. Test of Controls Observe separation of duties. Completeness – Ensure the recording of all purchases and disposals of assets. Correctly categorize assets as either capitalized assets and n Compare prior year’s return to check for changes. Check prior years return to review the changes. Contact business unit Financial Managers and confirm changes. Record all the transactions according to the company’s policy. Review correspondence and telephone conversation records. Determine if all the steps of the checklist are complete. Check records of assets purchases and disposals during the year. Rights and Obligations – The corporation controls and owns the assets. The company has the obligation to pay taxes on it. Review whether any assets were disposed of or purchased during the year. Valuation or Allocation – The costs of the assets reported are at their correct amount. Compare new ass with similar assets on record. Compare costs of new assets to market value with suppliers. Contact business unit Financial Managers and confirm costs of new assets if there are discrepancies. Compare cost of new asset with amount reported for similar assets on previous year’s returns. Check if any material amounts. Find and correct all the mistakes on the tax return. Review correspondence between preparer and Finance managers. Head intern reviews the return and pass on Review Notes form to intern for necessary corrections. Classification – Be sure to record assets under correct categories. Check for unspecified and un-descriptive assets listed as “other” and verify correct category with list provided. Review and confirm changes to asset categories are correct. Cutoff – Assets purchased after the end of the tax year are not included in the tax return. Check acquisition date on record by doing a filter by year. Check that the date on record matches with dates of purchase invoice. Make sure no assets purchased after end of year are included. Authorization – Restrict access to documents and data to authorized users only. Passwords are required to access documents. Check to see whether only authorized passwords can log into the company’s computer. Issue each person a separate password that gives access only to employee’s specific authorization level. Periodically ensure that individuals are not leaving their computer without logging out. Restrict access to unauthorized individual using other users’ password. Check for changes in passwords every three months as required. Perform data backup every 4 hours by authorized supervisor. Check if the authorized supervisor has done the backup properly only. Computer OperationsTake actions to facilitate the backup and recovery of important data. DISNEY PROPERTY TAX FLOWCHART Intern Assistant Treasurer Supervisor Head Intern Continued from Page 2 Save to e-file folder Print Provide Tax Return to head intern Initial and Date the Pink Slip Initial and Date the Pink Slip Yes Review Return, Is Information Complete and Correct? Yes No Review Return, Is Information Complete and Correct? Complete Review Notes Form for Corrections to be Made No Complete Review Notes Form for Corrections to be Made Correct Return Mail Tax Return to County File copy in the file room by company code Yes Sign Tax Return S-1 S-2 S-9 S-7 Assertion Completeness- All organizers, E-File authorization forms, and engagement letters should have been mailed to the client. Completeness- All of the documents that are required in order to prepare the tax return should be in the client’s file. Completeness- All steps on the routing sheet have been signed off on. Completeness- The tax return was electronically filed with both the federal and state government. All income and expenses from the previous year should be present on the current year’s tax return, unless otherwise specified by the client. If any income or deductions are not expected this year there must be a written note from the client stating so. After each step of the process, someone must sign off on the routing sheet to show that they performed a certain task. An activity report shows that the return has been accepted by both the Federal and State government. The client letter shows the date that the return was accepted by each government agency. Accuracy- The tax return has been entered accurately into Lacerte. S-3 Controls A list of clients whose tax returns were done last year should be printed. All clients on this list should be mailed an organizer, E-File authorization forms, and engagement letter this year. Each partner should sign the organizer before it is mailed out. The amounts on the source documents should match the amounts on the tax return. Tests of Controls Compare the list of clients from last year to the list of clients who were mailed these forms this year. Compare the list of clients from last year to the list of clients whose organizers each partner signed this year. Compare the documents that were received this year to last year’s documents. Check the file for a written note from the client regarding any missing information. Check the routing sheet to make sure each step has someone’s initials and the date the task was complete. Check the file to see if an activity report has been printed that shows the date and time that the return was electronically filed. Read the client letter to see if it says that the return was electronically filed and on what date. Valid Character Test- Lacerte will not allow letters to be input in a field that requires only numbers, or numbers to be entered into fields that require only letters. Missing Data Test- Lacerte will not allow a tax return to be printed or E-Filed if a field that requires information, such as a social security number or date There should be no critical diagnostics on the return. S-4 Accuracy- The tax return has been entered accurately into Lacerte. All of the source documents that are in the file should be correctly portrayed on the tax return. Accuracy- The tax return has been entered accurately into Lacerte. The client approved the tax return for filing. Existence- All of the numbers entered on the tax return can be found on a source document in the file. Existence- All of the numbers entered on the tax return can be found on a source document in the file. Classification- All income and deductions are recorded in the proper place. All of the source documents that are in the file should be included on the tax return. Sort the source documents by type (Income, Deduction) and trace them to the tax return. Every number on the tax return (unless calculated) should be found on a source document. Perform vouching- make sure every number on the tax return can be found on a source document in the file. Verify that source documents and the tax return agree. Verify that all income and deductions were entered in the proper place on the return. Check the names and social security numbers on the source documents to ensure that they belong to the client. Compare this year’s tax return to last year’s tax return. Check the file for written verification is any amounts are substantially different from the previous year’s return. Make sure that all of the forms that are available in Lacerte for S-6 S-4 S-5 S-5 S-3 S-5 of birth, is left empty. Error Correction and Resubmission- Check the diagnostics on the tax return to see if there are any critical issues. Perform tracing to make sure that all of the source documents in the file are traceable to an exact number on the tax return. Check the file for any e-mail or fax communication from the client that specifically says that they give Arxis Financial permission to file their tax return. Check the routing sheet to see if it has been initialed that the client was sent a draft copy and that the draft was approved. All documents are sorted by type and entered in the tax organizer before being entered into Lacerte. Rights and Obligations- The client has the rights to the income and deductions being entered on the return. Valuation and AllocationIncome and deductions are recorded in the tax return at appropriate amounts. No income or deductions are entered unless there is an original source document for the income/deduction. No income/deductions can be entered that are substantially different from the previous year without obtaining written verification from the client. Understandability- The assembled return is clear The assembled return should clearly and accurately portray and concise. S-8 the client’s income and deductions for that year. that client have been printed and neatly stapled to a client copy folder. Check the client letter to make sure that their refund or the amount they owe is clearly stated as well as where they must send the return and by what date. Attachment B Preparing an Individual’s Income Tax Return Partner Staff Accountant CPA Pg 1 of 2 Intern START Mail tax organizer, engagement letter, & E-File authorization forms to clients S-1 Schedule a review appointment with client Meet with client; Collect all relevant tax documents, including signed engagement letter and E-File authorization forms S-2 Have all documents been collected? Copy all documents; Sign off on routing sheet for copying the documents. Yes No S-3 Collect missing data from client S-9 S-5 S-9 S-9 Prepare tax return in Lacerte. Sign off on routing sheet for preparing tax return Print a review copy of the return. Put on the detail review shelf. Issue review the return. Sign off on the routing sheet for issue review. Set up the client file Detail review the return. Sign off on the routing sheet for detail review. If there are any errors or questions, write them on the query sheet. S-4 Are there any errors on the return? No See pg 2 Yes Make corrections to the return. S-9 Receiving Purchasing Prepare Wood Purchase Order (PO) Accounts Payable Controller Treasure Package PO (2), PO (3), Vendor Invoice, & Packing Slip Receive Packages Files, Checks, Check Stubs & Tape Receive Packages File, Checks, Check Stubs, & Signed Tape Post Check Amounts to Cash Disb. Book Review all Supporting Documents Compare Calculator Tape to Cash Disb. Book Sign the Checks Does tape match disb. book’s totals? Return File, Signed Checks, Check Stubs, & Signed Tape PO Pink Copy (3) PO White Copy (2) Prepare a Packages File Receive PO (3) PO Yellow Copy (1) D Check Wood Received & Sign Vendor’s Packing Slip Send PO (1) to Vendor PO (2) Pull out the Packages File 10 Days before Due Accurate? Yes No Used as Control & Open Order Follow-Up No Yes Warehouse Manager Accepts or Objects N Prepare Checks & Check Stubs 1 Sign Tape Object Accept Receive Vendor Invoice Pull PO (2) & Check against Vendor Invoice No Match? Note Vendor Invoice No. on Checks & Stubs Send PO (3) & Packing Slip 1 Used as Control & Open Order Follow-Up Prepare a Calculator Tape of all Payments Gather Invoices, Pos, Send Files, Checks, Checks, & Checks Check Copies, & Copies Signed Tape Receive File, Signed Checks, Check Stubs, & Signed Tape Mail Checks to Vendors Yes Assign Vendor Invoice No. & Record Purchase Send PO (2) & Vendor Invoice N Send the Packages File, Checks, Check Stubs, & Tape Stamp Vendor Invoices “Paid” File the Paperwork by Invoice No. N