audit evidence Flashcards
What is the difference between audit procedures and audit evidence?
Audit procedures are actions
while audit evidence is the result of these procedures, documented
What are financial statement assertions?
Assertions are attributes of financial statements that must be true for them to give a true and fair view, such as completeness and valuation.
How can financial statement assertions help in deciding on audit evidence?
By aligning audit tests and evidence with the relevant assertions to verify if they are true, thus ensuring the financial statements provide a true and fair view.
What is the appropriate audit evidence for the impairment review of Italian stores based on value in use?
-Extracts from management accounts
-board minutes
-a schedule comparing carrying value with recoverable amount
- a completed audit programme for non-current assets
-calculation of value in use.
What audit evidence should you expect for a provision for redundancy costs due to factory closure?
-Announcement of restructuring, -a working paper detailing redundancy payments
-a schedule of payments to employees
-a point in the management representation letter on additional costs
-details on the factory’s fate, and a copy of the outsourcing contract.
What audit evidence is necessary to verify if a sale and leaseback arrangement is classified correctly as an operating lease?
-A copy of the leasing contract
-a schedule comparing lease payments to asset fair value
-a note on lease length vs. asset useful life
-a schedule for finance lease calculations
-related party disclosures in the management representation letter.
When answering exam questions about audit evidence, how should you structure your response?
Start with “I would expect to see” and then list the relevant evidence as bullet points.
What should be included in audit evidence when assessing an impairment review of assets?
-Documentation showing the performance comparison
-impairment calculation
-any relevant audit programme results.
What evidence helps verify the correctness of a redundancy provision?
-details of the restructuring announcement,
-calculations of redundancy payments,
-schedules of employee payments,
-contractual obligations.
How do you determine the correct classification of a leaseback arrangement in an audit?
By reviewing the leasing contract, comparing present value of payments to fair value, and ensuring lease terms align with asset useful life.
Why is it important to understand both audit procedures and audit evidence in exams?
To accurately answer questions and provide relevant evidence rather than describing procedures.
What types of evidence are required to verify the accuracy of financial statement figures?
-calculations
-source documents
-compliance with accounting standards.
In the context of audit evidence, what should you consider for subsequent events like impairment reviews?
-Performance reviews,
-management plans
-asset valuation schedules,
-audit programme results.
*sufficiency and appropriateness definition
sufficiency - quantity
appropriateness - quality
*general factors which make audit evidence unreliable
-internal document or confirmed by third party
-orginal or photocopy
-oral or written
-verified document or not
-received by mgmnt or third party
-reliability of system which generated the report
