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AudTheo > Audit Evidence > Flashcards

Audit Evidence Flashcards

1
Q

Substantive testing

A

Audit Proc designed to substantiate the account balances or detect mat mis in FS

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2
Q

2 Types of subs test

A
  • analytical proc
  • test of details

decision which proc to use is based on auditors judgement about effectiveness and efficiency of such proc in satifying audit obj

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3
Q

Analytical Proc

A

maybe used in the planning, testing, and overall review stages of an audit.

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4
Q

anal proc used as subs test

A
  • to obtain corroborative evidence about a particular account
  • should focus on accounts that are predictable
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5
Q

Generalization in assessing predictability (anal proc used as subs)

A
  • IS acc are more predictable than BS acc
  • Acc that are not subj to mngt discretion are generally predictable
  • Relationship in a stable envi are more predictable than unstable envi
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6
Q

Test of details

A

examining that actual details making up various acc bal

2 types:
test of details of balances
test of details of transactions

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7
Q

test of details of balances

A

direct testing of Ending bal

-use when acct bal are affected by large volume of immaterial trans

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8
Q

test of details of transaction

A

test the trans which give rise to the ending bal

  • useful for smaller volume of trans
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9
Q

Effectiveness of subs test

A

affected by nature, timing, and extent

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10
Q

nature of subs test

A

relate to quality of evidence

high quality of evidence means high cost

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11
Q

timing of subs test

A
  • may be performed at interim or year end
  • less effective due to incremental audit risk involved when auditing at interim
  • higher risk of mat mis more likely to perform subs test closer to year end
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12
Q

performing aud proc at interim date

A

assist the auditor in identifying significant matter at early stage. can also help mngt to resolve or develop effective aud approach to address the matter.

-will also minimize load during peak period

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13
Q

extent of subs test

A
  • relates to the amount of evidence needed to satisfy a particular obj.
  • increase the extent of subs test as the risk of mat mis increases
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14
Q

test of controls

A
  • provide evidence that indicates a misstatement is likely to occur
  • result of test of control major factor in determining the NTE of auditor’s subs test
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15
Q

subs test

A
  • provide evidence about the existence of misstatement in acc bal
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16
Q

note

A
  • IC is effective less subs tes

- not eff more subs test

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17
Q

Audit Evidence

A
  • info obtain by the auditor in arriving at conclusion on which the audit opinion is based
  • obtained as a result of test of controls and subs test

consist of:

  • Underlying acc data
  • corroborating info
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18
Q

underlying acc data

A

Acc records underlying the FS

includes:

  • book of acc
  • worksheet
  • recon prep by client personnel
19
Q

Corroborating info

A

supporting the underlying acc data obtained from client

includes:

  • bank statement
  • purch order
  • contracts
  • invoices
  • cheks
20
Q

NOTES

A

Acc data can not be considered sufficient evidence to support an opinion. auditor must obtain corro info to support audit report

21
Q

Qualities of Evidence

A

when obtaining Aud evidence from either TOC and subs test aud should consider: (by used of judgement)

  • Sufficiency
  • Appropriateness
22
Q

NOtes

A

when perf TOC aud evidence must support assessed level of control risk. per subs test aud evidence must support acceptable level of detection risk

23
Q

Sufficiency

A

amount of evi that the aud should accumulate bec of cost-benefit aud cant examine all evi.

Consider in evaluating suff of evi:

  • competence (more compe; less evi)
  • materiality (more mat the fs; more evi , if not mat then no need to perf) related to acc)
  • risk (inc risk; more evi)
  • experience
24
Q

Appropriateness

A

Measure of Quality of aud evi and its relevance to particular assertion and reliability

25
Q

relevance

A

timeliness of evi and ability to satisfy the aud obj

26
Q

generalization that help to assessed aud evi

A
  • aud evi from inde oitside sources is more reliable than generated internally
  • aud evi generated internally is more reliable when the related IC are effective
  • aud evi in form of docu and written more reliable han oral
  • aud evi obtain by Aud more reliable than obtained from entity
27
Q

NOTE

A

Aud evi is persuasive than conclusive. seek aud evi from diff sources and diff nature to support same assertion are consistent

  • also there is a rational relationship between the cost of obtaining evidence and the usefulness of the info obtained.
  • auditor’s opinion to be economically useful must be formed within a reasonable period of time and based on evidence obtained at a reasonable cost.
28
Q

Audit Documentation/Working Paper

A

Suff App evidence required by the professional standards must be clearly documented in the auditor’s working paper.

  • kep by the auditor that docu the audit proc applied, info obtained and conclusions reached.
29
Q

PSA 230

A

Requires auditor to docu matters that are important to support an opinion on financial statement, and evi that the audit was concluded in accordance with psa

30
Q

Working papers prepared primarily to :

A
  • Support the auditor’s opinion on fs
  • support the auditor’s representation as to compliance with psa
  • assist the auditor in the planning, perf, review ans supervision of the eng
31
Q

Working papers prepared secondarily to assist auditor in

A
  • planning future audits
  • providing info useful in rendering other services (MAS OR TAX)
  • providing adequate defense in case of litigation
32
Q

form, content, and extent of aud docu

A

aud should consider what would enable an experienced auditor, having no prev connection with the audit to understand:

  • NTE of aud proc perf to comply with psa and applicable legal and regulatory req
  • the results of the audit proc and aud evi obtained
  • significant matters arising during the audit and conclusions reached
33
Q

ff important items required docu

A
  • discussion of significant matters with mngt and others on timely basis
  • exceptional circumstances, when aud judges it is necessary to depart from a basic principles that is relevant to audit. aud should docu how the alternative aud proc perf achieve the obj of the audit and the reason for departing
  • docu of NTE of aud proc perf should docu, who perf the aud work and the date work completed and who reviewed the aud work perf and date and extent of review
34
Q

Classificarion of WORKING PAPERS

A
  • permanent file

- current file

35
Q

Permanent file

A

Info of continuing significance to the aud in perf recurring audit. includes:

  • Copies of AOI and bylaws
  • major contracts
  • Eng letter
  • org chart
  • analyses of long term acc: plant asset liab and stockholder acc
  • IC analysis
36
Q

Current file

A

Evidence gathered and conclusions reached relevant to the audit of a particular yr

  • copy of fs
  • aud program
  • working trial balance
  • lead sched
  • detailed sched
  • Correspondence : lawyers, cust, banks, and mngt
37
Q

Ownership of WP

A

WP property of the auditor client has no right to thr wp prepared by auditor. it can be referrened source for client but not subs the client records

38
Q

confidentiality of wp

A

WP cant be shown to 3rd party without clients permission.

can be shown if overridden by the statute of law even without clients perm:

  • Disclosure is req by law or when wp are subpoenaed by a court
  • defend himself when sued by the client for negligence
39
Q

retention of wp

A

Retained by the auditor for a period of time suff to meet the needs of his practice and satisfy any pertinent legal req of record retention

40
Q

Guidelines for prep of WP

A
  • Heading : client name, type of WP, desc of content, date covered by the examination
  • Indexing : Lettering or numbering system
  • Cross indexing/cross referencing : important to provide a trail useful to supervisors in reviewing the wp
  • tickMarks : include symbol that describe the aud proc perf
41
Q

Auditing Estimates (PSA540)

A

An approximation of the amounts of an item in the absence of a precise means of measurement

  • risk of mis mat is greater when acc est are involved
42
Q

Auditor’s Responsibility

A

obtain the suff app evidence as to whether

  • acc est is properly accounted for and disclosed = need to understand clients bus and app of relevant finrep standard
  • acc est is reasonable in the circumstances = obtain understanding of proc and methods used by mngt in making the acc est
43
Q

Auditor may used 1 or combi approaches to test est

A
  • review and test the proc used by mngt to develoop the est
  • make an ind est
  • review subs events which confirm the est made

after perf approaches, aud should make final assess of reasonableness of est based on aud knowledge of the bus and est consistent with other aud evi obtained

AudTheo (6 decks)

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