Audit Evidence Flashcards
What are the three categories of assertions?
- Classes of transactions and events
- Account balances at the period-end
- Presentation and disclosure
What are the types of assertions for classes of transactions?
- Occurence (transactions that have been recorded have occurred and pertain to the entity)
- Completeness (all transactions that should have been)
- Accuracy (amounts and other data have been recorded appropriately)
- Cutoff (transactions have been recorded in the correct accounting period)
- Classification (transactions have been recorded in the proper accounts)
What are the types of assertions for account balances at period end?
- Existence (assets, liabilities, and equity interests exist)
- Rights and obligations (entity holds/controls the rights to assets, and liabilities are the obligations of the entity)
- Completeness (all A,L,&E have been recorded)
- Valuation and allocation (A,L,&E are included in F/S at appropriate amounts and the allocation adjustments recorded appropriately)
What types of assertions for presentation and disclosure?
- Occurrence and rights and obligations (disclosed events have occurred and pertain to the entity)
- Completeness (all disclosures that should have been included in the F/S have been)
- Classification and understandability (financial info are appropriately presentee and described, and disclosures clearly expressed)
- Accuracy and valuation (financial info are disclosed fairly and in appropriate amounts)
Define relevant assertion
Assertions that have a reasonable possibility of containing a material misstatement that would cause the F/S to be materially misstated and have a meaningful impact on whether the account is fairly stated.
Define audit program
A listing of details of the audit procedures to be used when testing controls, conducting detailed substantive audit procedures, and completing the audit.
Define audit evidence
It is the information auditors use when arriving at their opinion on the fair presentation of the client’s F/S.
What does sufficient mean in regards to audit evidence?
It refers to the quantity of audit evidence gathered. If they have enough evidence gathered to support their opinion on the F/S.
What does appropriate means in regards to audit evidence?
It refers to the quality of audit evidence gathered. The higher the quality of the evidence, the less quantity may be required.
What does relevance mean?
Refers to the logical connection with the assertion being tested.
Define reliability
It refers to the source of the evidence and form or nature of the evidence.
What are the different types of reliability sources?
- Independent
- Effective internal controls
- Direct knowledge by auditor
- Original documents
- Documented
What are audit procedures?
They are the methods used by auditors in gathering evidence.
What are the three categories of audit procedures?
- Risk assessment (methods used to gain an understanding of a client and its industry for the purpose of identifying RMM)
- Tests of controls (methods used to determine the operating effective of the client’s controls in preventing, or detecting and correcting, material misstatements at the assertion level)
- Substantive procedures (methods designed to detect material misstatements at the assertion level. Two categories of substantive procedures are tests of details and substantive analytical procedures)
Give examples of the three audit procedures.
Risk assessment: auditors inspect the BOD’s meeting minutes to become familiar with the objectives and strategies of the client.
Tests of controls: auditors inspect POs for proper authorization by a manager before a purchase is made.
Substantive procedure: auditors inspect vendor invoices in support of management’s assertion of the valuation of inventory.
