1.1 - Evidence Cont Flashcards
What do the directors set up?
Systems of internal controls to ensure they report correctly to the shareholders
When the auditors carry out tests of control, what are they seeking?
Seeking to rely on the good operation of the control system that the company has in place to draw a conclusion that the financial statements give a true and fair view
What are the auditors required to conclude?
Required to conclude whether the financial statements give a true and fair view
What do the auditors evaluate and why?
The control system put in place to assess whether it is capable of producing financial statements which give a true and fair view
What do the auditors test and why?
The control system to assess whether it has operated as it was intended to, therefore giving assurance that the financial statements give a true and fair view
What are the auditors doing when they carry out substantive procedures?
They are testing whether specific items within balances or transactions in the financial statements are stated correctly
What do ISA standards require auditors to do and why?
Require that auditors must always carry out some substantive procedures, because the limitations in systems of internal control mean that the systems of control can never be fully relied upon
In addition to considering the quality of audit evidence obtained, what else should the auditor consider?
Also consider the relative efficiency of each approach
In an audit area in which there are lots of transactions, what is more efficient?
It is likely to be more efficient to test controls than to test substantively
When may it be more efficient to use substantive procedures?
When testing a small number of highly material assets
