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Becker Audit > Audit 4- Audit Evidence > Flashcards

Audit 4- Audit Evidence Flashcards

1
Q

Examples of Substantive Procedures

A
  1. Observation
  2. Inquiry
  3. Confirmation
  4. Recalculation
  5. Reperformance
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2
Q

Hierachy of Audit Evidence

A

Auditor’s Direct Personal Knowledge & Observation
External Evidence
Internal Evidence
Oral Evidence

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3
Q

Test of Details - Tracing

A

Evidence of Completeness

Trace forward from source documents to journal entries

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4
Q

Test of Details - Vouching

A

Evidence of Existence/Occurence

Vouch backwards from journal entries to source documents

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5
Q

Audit Risk: Understatement

A

Related to Expenses & Liabilities

Trace

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6
Q

Audit Risk: Overstatement

A

Related to Revenue & Assets

Vouch

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7
Q

Objective of Vouching

A

To gather evidence regarding possible overstatement errors (existence or occurrence assertions). Vouching backwards.

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8
Q

Reconciliation

A

Substantiates existence and valuation of accounts

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9
Q

Objective of Tracing

A

Gather evidence regarding possible understatement of errors (completeness assertion), tracing forward.

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10
Q

Assertion & Auditing Procedure:

Completeness

A
  1. Tracing
  2. Analytical Review
  3. Observation
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11
Q

Assertion & Auditing Procedure:

Valuation, Allocation & Accuracy

A
  1. Inspection
  2. Footing
  3. Independent recalculation
  4. Reconciliation
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12
Q

Assertion & Auditing Procedure:

Existence & Occurrence

A
  1. Confirmation- w/ 3rd parties as example
  2. Observation, inspection, examination
  3. Vouching
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13
Q

Assertion & Auditing Procedure:

Rights & Obligations

A

Inspection

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14
Q

Assertion & Auditing Procedure:

*Understandability & Classification”

A
  1. Inspection
  2. Review
  3. Inquiry of management
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15
Q

Most relevant assertion for revenue cycle

A

Existence - risk a/r and sales will be overstated is high

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16
Q

Biggest concern of expenditure cycle

A

Understatement of expenses & liabilities

17
Q

Inventory cycle- what should be reconciled

A

Inventory & COGS

18
Q

Investment cycle- what should be reconciled

A

Interest & Dividends

19
Q

Most significant payroll and personnel cycle risks

A

Creation of ficticious employees & falsification of hours worked.

20
Q

Auditor’s primary emphasis on auditing related party transactions.

A

Auditor must determine whether they are adequately disclosed in accordance with GAAP.

21
Q

Assertion for Revenue Transactions

A

Existence & Occurence Assertion

22
Q

Assertion for Expense Transactions

A

Completeness Assertion

23
Q

Assertion for Asset Accounts

A

Existence (ensure not overstated)

24
Q

Assertion for Liability Accounts

A

Completeness (ensure not understated)

25
Q

What does reconciliation substantiate?

A

Existence and Valuation of accounts

26
Q

Prime area for recalculation auditing procedure

A

Related to estimates made by clients.

27
Q

What is observation, inspection, examination mainly used for as auditing procedure

A

Evidence regarding:
Assets,
Processes
Procedures

28
Q

Segregation of Duties

A.R.C.

A

A.- Authorization
R.- Record Keeping
C.- Custody

29
Q

Transaction Cycle - Path to Financial Statements

A
  1. Transaction Approved
  2. Execution of Event
  3. Source Documents
  4. Books of Original Entry
  5. Subsidiary Ledger
  6. General Ledger
  7. Trial Balance
  8. Financial Statements
30
Q

When Should a Cutoff Review take place?

A

Should be performed on year-end transactions, especially inventory, cash, purchases, sales, and accruals.

31
Q

Subsequent Events Review

A

Evidence becomming available after B/S date should be used in making judgments about valuation of assets and liabilities on B/S date. Ex: decreases in L/T debt, may indicate such debt should be reported as current liability on B/S.

32
Q

Most Relevant Assertion for Account Balances

A

Completeness
Valuation, Allocation, Accuracy
Existence & Occurence
Rights & Obligations

33
Q

Most Relevant Assertions for Transactions & Events

A

C.O.V.E.U.

Completeness
Cutoff
Valuation, Allocation, Accuracy
Existence & Occurence
Understandability and Classification
34
Q

Most Relevant Assertion for Presentation & Disclosure

A

C.V.R.U.

Completeness
Valuation, Allocation, & Accuracy
Rights & Obligations, & Occurrence
Understandability & Classification

35
Q

What are cutoff procedures usually performed on?

A

Year-end transactions:

Inventory
Cash
Purchases
Sales
Accruals

Becker Audit (6 decks)

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