Audit approach

Question 1

What are the 5 evidence collection techniques?

AEIOU

Answer 1

Analytical procedures
Enquire
Inspect
Observe
RecalcUlate

Question 2

What are the Pros of using Analytical Procedures as an evidence collection technique?

Answer 2

> Can perform even if documents are not available
Efficient as doesn’t require detailed tests of lots of items

Question 3

What are the Cons of using Analytical Procedures as an evidence collection technique?

Answer 3

> Limited by any weakness in the underlying accounting system

Question 4

What are the Pros of using Enquiry as an evidence collection technique?

Answer 4

> May be only way to audit judgmental issues
(backed up by WR)

Question 5

What are the Cons of using Enquiry as an evidence collection technique?

Answer 5

> Weakest form of evidence

Question 6

What are the Pros of using Inspection as an evidence collection technique?

Answer 6

> 3rd party documents are always strong evidence

Question 7

What are the Cons of using Inspection as an evidence collection technique?

Answer 7

> Internal documents may be manipulated

Question 8

What are the Pros of using Observation as an evidence collection technique?

Answer 8

> Good for inventory counts

Question 9

What are the Cons of using Observation as an evidence collection technique?

Answer 9

> Only gives evidence that the procedure is being performed correctly when auditor is watching

Question 10

What are the Pros of using Recalculation as an evidence collection technique?

Answer 10

> Auditor created evidence is a strong form of evidence

Question 11

What are the Cons of using Recalculation as an evidence collection technique?

Answer 11

> Can be time consuming

Question 12

What are 3 points that addresses the procedures in an audit approach?

Answer 12

1.Auditor needs to collect sufficient and appropriate evidence
2. Sample sizes will need to be increased if ROMM or error is greater than expected
3. Appropriate evidence should be reliable and relevant / relate to FS
(see assertions)

Question 13

What are the assertions that relate to the Balances (SOFP)

CARVE

ISA 315 para A124

Answer 13

Completeness
Rights & Obligations
Accuracy
Valuation
Existence

Presentation & Disclosure

Question 14

What are the assertions that relate to the transactions (SPL)

COCCA

ISA 315 para A124

Answer 14

Completeness
Occurrence
Classification
Cut-Off
Accuracy

Presentation & Disclosure

Question 15

What is the acronym for matters to consider for Procedures when relying on the work of others?

STRIP

Answer 15

Scope
Technical competence
Resources
Independence
Professionalism

Question 16

What is a key issue and an example of a procedure for the matter to consider: ‘Scope’

Answer 16

Key issue: Has the work been performed in accordance with IFRS?
Procedure: Inspect engagement letter / instructions of the expert to confirm an appropriate measurement basis have been used.

Question 17

What is a key issue and an example of a procedure for the matter to consider: ‘Technical competence’

Answer 17

Key issue: Is the expert qualified/ up to date
Procedure: Review the expert’s qualifications and training to ensure they are able to perform the work.

Question 18

What is a key issue and an example of a procedure for the matter to consider: ‘Resources’

Relying on the work of others

STRIP

Answer 18

Key Issue: Has the work been performed properly
Procedure: Inspect the work produced by the expert to ascertain if the work performed was appropriate and detailed.

Question 19

What is a key issue and an example of a procedure for the matter to consider: ‘Independence’

Answer 19

Key Issue: is the expert independent (they may have incentive to overstate results if they’re not)
Procedure: Obtain a list of shareholders and confirm that the expert is not a shareholder.

Question 20

What is a key issue and an example of a procedure for the matter to consider: ‘Professionalism’

Relying on the work of others

STRIP

Answer 20

Key Issue: Is the expert taken seriously / do they have the power to change things?
Procedure: Review board minutes to identify what actions have been implemented following the expert’s suggestion.