Audit Process and Acronyms for Part B

Question 1

1st step?

Answer 1

Accept audit engagement

Question 2

2nd step?

Answer 2

Understand the entity and its environment

Question 3

3rd step?

Answer 3

Assess the risk of material misstatement

Question 4

4th step when effective controls are expected?

Answer 4

Tests of controls

Question 5

4th step when effective controls aren’t expected?

Answer 5

Communicate deficiencies

Question 6

If test of controls prove to be unsatisfactory (Step 5)?

Answer 6

Communicate deficiencies

Question 7

Test of controls prove to be satisfactory (Step 5)?

Answer 7

Reduced substantive procedures

Question 8

Step after communicate deficiencies (Step 5)?

Answer 8

Full substantive procedures

Question 9

Step after reduced substantive procedures and full substantive procedures (Step 6)?

Answer 9

Final review

Question 10

Steps after final review (Step 7)?

Answer 10

Report to management

Auditor’s report

Question 11

Financial statements are materially misstated. Material but not pervasive

Answer 11

Qualfiied opinion

Question 12

Financial statements are materially misstated. Material and pervasive

Answer 12

Adverse opinion

Question 13

Inability to obtain sufficient appropriate evidence. Material but not pervasive

Answer 13

Qualified opinion

Question 14

Inability to obtain sufficient appropriate evidence. Material and pervasive

Answer 14

Disclaimer of opinion

Question 15

How to understand substantive procedures?

Answer 15

Apply AEIOU on DADA3 (evidence) to verify COCCA (income statement) or EVCR (balance sheet)

Question 16

A in AEIOU?

Answer 16

Analytical procedures

Comparisons, ratio analysis

Question 17

E in AEIOU?

Answer 17

Enquiry

Enquire with management about their assumptions, confirm info with third parties

Question 18

I in AEIOU?

Answer 18

Inspection

Inspect documents, inventory, sales and purchase invoice, non-tangible

Question 19

O in AEIOU?

Answer 19

Observation

How management is monitoring the activity

Question 20

U in AEIOU?

Answer 20

Recalculation

Recalculate to make sure there’s no mathematical mistake

Question 21

Ds in DADA3

Answer 21

Directors and doc uments

Question 22

As in DADA3

Answer 22

Assets and according records

Question 23

3 in DADA3?

Answer 23

3rd parties (banks, lawyers)

Question 24

1st C in COCCA?

Answer 24

Completeness (1st step)

All revenues and expenses have been recorded by the management

Question 25

O in COCCA?

Answer 25

Occurrence (2nd step)

All transactions should have actually occurred and pertain to entity

Question 26

A in COCCA?

Answer 26

Accuracy (5th step)

All sales, expenses should be valued at the correct amount

Question 27

E in EVCR?

Answer 27

Existence (1st step)

All assets, liabilities and capital is REAL AND CAN BE VERIFIED TANGIBLE

Question 28

V in EVCR?

Answer 28

Valuation (2nd step)

Must be at the correct value

Question 29

C in EVCR?

Answer 29

Completeness (3rd step)

Has anything been missed

Question 30

R in EVCR?

Answer 30

Rights and obligations (4th step)

Should we have rights by us (asset), do we have the obligation (liability)

Question 31

2nd C in COCCA?

Answer 31

Cut-off (3rd step)

Things should have been occurred in the correct accounting period

Question 32

3rd C in COCCA?

Answer 32

Classification (4th step)

Recorded in proper accounts (e.g. Cost of sales should be recognised in cost of sales)

Question 33

Is 7.5% of profit material?

Answer 33

YES

Question 34

What is meant by testing for accuracy in COCCA?

Answer 34

To determine whether something exists and is complete