audit evidence Flashcards

1
Q

What is the difference between audit procedures and audit evidence?

A

Audit procedures are actions
while audit evidence is the result of these procedures, documented

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2
Q

What are financial statement assertions?

A

Assertions are attributes of financial statements that must be true for them to give a true and fair view, such as completeness and valuation.

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3
Q

How can financial statement assertions help in deciding on audit evidence?

A

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.

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4
Q

What is the appropriate audit evidence for the impairment review of Italian stores based on value in use?

A

-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.

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5
Q

What audit evidence should you expect for a provision for redundancy costs due to factory closure?

A

-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.

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6
Q

What audit evidence is necessary to verify if a sale and leaseback arrangement is classified correctly as an operating lease?

A

-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.

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7
Q

When answering exam questions about audit evidence, how should you structure your response?

A

Start with “I would expect to see” and then list the relevant evidence as bullet points.

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8
Q

What should be included in audit evidence when assessing an impairment review of assets?

A

-Documentation showing the performance comparison
-impairment calculation
-any relevant audit programme results.

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9
Q

What evidence helps verify the correctness of a redundancy provision?

A

-details of the restructuring announcement,
-calculations of redundancy payments,
-schedules of employee payments,
-contractual obligations.

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10
Q

How do you determine the correct classification of a leaseback arrangement in an audit?

A

By reviewing the leasing contract, comparing present value of payments to fair value, and ensuring lease terms align with asset useful life.

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11
Q

Why is it important to understand both audit procedures and audit evidence in exams?

A

To accurately answer questions and provide relevant evidence rather than describing procedures.

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12
Q

What types of evidence are required to verify the accuracy of financial statement figures?

A

-calculations
-source documents
-compliance with accounting standards.

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13
Q

In the context of audit evidence, what should you consider for subsequent events like impairment reviews?

A

-Performance reviews,
-management plans
-asset valuation schedules,
-audit programme results.

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14
Q

*sufficiency and appropriateness definition

A

sufficiency - quantity
appropriateness - quality

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15
Q

*general factors which make audit evidence unreliable

A

-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

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16
Q

how to evaluate sufficiency and appropriateness of evidence

A

evaluate against general factors
evaluate against assertions
evaluate against accounting treatment