Audit Objectives and Management Assertions Flashcards
Assertions about valuation or allocation
deal with whether asset, liability, revenue, and expense components have been included in the financial statements at appropriate amounts.
Examples - Historical cost, Depreciation
The presentation and disclosure assertion relates to
the fact that the financial statements should reflect all pertinent information necessary to reach an informed decision concerning the company
The completeness assertion is concerned with
determining that all trasactions are recorded
The existence assertion is concerned that
all items recorded in the accounting records are valid (not fictitious)
Management assertions with regard to financial reporting are made in relation to three broad areas;
(1) transaction-related events; (2) account-balances; and
(3) presentation and disclosure
auditor’s purpose in reviewing the renewal of a note payable shortly after the balance sheet date most likely is to obtain evidence concerning management’s assertions about
Presentation and disclosure
what is a relevant form of evidence with regard to assertion about accounts receivable when the auditor has concern about the receivables
existence
auditor most likely would analyze inventory turnover rates to obtain evidence concerning management’s assertions about
valuation and allocation
From shipping document to invoives
completeness
Test from the accounting documents to the supporting information/evidence
Existence
Cutoff Tests - searching for items that have been omitted from the F/S or the current period
Completeness
Which of the following audit procedures is best for identifying unrecorded trade accounts payable?
Reviewing cash disbursements recorded subsequent to the balance sheet date to determine whether the related payables apply to the prior period.
In auditing a client’s retained earnings account, an auditor should determine whether there are any restrictions on retained earnings that result from loans, agreements, or state law. This procedure is designed to corroborate which financial statement assertion
Presentation and Disclosure
Vendors with whom the entity has previously done business with
provide the most reliable source of audit evidence, since the evidence is derived from external third parties.
Confirmation of A/R provides evidence of
Rights and Obligations & Existence
