Audit Evidence

Question 1

Managements assertions of the financial statements

Answer 1

U-PERCV
--
Understandability+Classification
Presentation+Disclosure
Existence+occurrence
Rights+obligations
Completeness+cutoff
Valuation,allocation,accuracy

Question 2

Objective of substantive testing

Answer 2

find enough evidence to support managements assertions, using audit procedures

Question 3

Audit Procedures

Answer 3

ICORRIIA
--
Inquiry
Confirmation
Observation
Recalculation
Reperformance
Inspection of tangible assets
Inspection(examination) of records and documents
Analytical procedures

Question 4

Five basic comparisons to be used at analytical proceduers

Answer 4

CRAFT
--
Client v. Industry
Related Accounts
Actual v. Budget
Financial v. Non-Financial
This year v. Prior

Question 5

Current Ratio

Answer 5

CA divided by CL

Shows us how solvent a company is; measures short-term debt paying ability

4 over 1 is good, 1 over 4 is bad

Question 6

Quick ratio aka acid test ratio

Answer 6

quick assets aka cash plus marketable securities plus accounts receivable

basically current assets without inventory

divided by current liabilities

Question 7

Receivables turnover

Answer 7

This tells you your receivables turnover X times per month; 360 divided by X

Question 8

Inventory turnover

Answer 8

This tells you your inventory turns over X times per year

Question 9

Debt to equity ratio

Answer 9

total liabilities divided by stockholders’ equity