chap 7 audit documentation

Question 1

auditing standards state that audit documentation is what?

Answer 1

the record of the audit procedures performed, relevant audit evidence, and conclusions the auditor reached.

Question 2

audit documenation should include all the info the auditor considers necessary to do what?

Answer 2

adequately conduct the audit and to proide support for the audit report

Question 3

the overall objective of audit documentation is to do what?

Answer 3

aid the auditor in providing reasonable assurance that an adquate audit was conducted in accordance with auditing standards

Question 4

what are the 4 purposes of audit documentation?

Answer 4

1.Basis for planning the audit- to plan an audit, the necessary reference info must be availble in the files 2. Record of the evidence accumulated and the results of the tests- can demonstrate to regulatory agencies and courts if need be that the audit was well planned and aequately supervised, evidence appropriate and sufficient, and the audit report was proper given the results of the audit 3.Data for determining the proper type of audit report- 4.Basis for review by supervisors and partners

Question 5

in addition to the purposed directly related to the audit report, the audit files often serve as the baisis for what?

Answer 5

preparing tax returns filings with the SEC other reports source of info for issuing communication to managment and those that govern the company

Question 6

all audit files (documentation)are teh property of who?

Answer 6

the auditor

Question 7

when is the only time anyone else incluiding the client has a legal right to examine the audit files?

Answer 7

when they are subpoenaed by a court as legal evidence or when they are examined by approved peer reviewers or regulatory inspectors

Question 8

Auditing standards require records of private companies be retained for a minimum of ?

Answer 8

5 years

Question 9

Sarbanes-Oxley Act requires auditors of public companies to maintain audit files for a minimum of ?

Answer 9

7 years

Question 10

Permanent Files: Contain what kind of data

Answer 10

data of a historical or continuing nature. These provide a convenient source of information that is used from year to year

Question 11

what are 4 examples of the kind of data in permanent files?

Answer 11

1.Copies of company documents such as articles of incorporation, bylaws, bond indentures, and long-term contracts 2.Analyses of accounts from previous years that have continuing importance 3.Information related to understanding internal controls and assessing control risk 4.Results of analytical procedures from prior years’ audits for comparison

Question 12

what do the current files include?

Answer 12

: Includes all documentation for the current year audit 1. Audit Program 2.Working Trial Balance—Each line in the trial balance is supported by a lead schedule. . 3. Adjusting Entries—Auditors propose adjusting entries for material misstatements. 4/ Supporting Schedules

Question 13

what is the working trial balance?

Answer 13

a listing of the general ledger accounts and their year end balances

Question 14

what is a lead schedule?

Answer 14

it contains the detailed accounts from the general ledgermaking up the line item total.

Question 15

when the auditor discover material misstatments in the accounting records, the FSs must be corrected. the adjusting entries are often prepared by the auditor but they must be approved by who?

Answer 15

the client since managment has the primary responsiblity for the fair presentation of the statements

Question 16

only adjusting entries that do what to the FSs must be recorded?

Answer 16

significantly affect the fair presentation of financial statments and auditors decide shen misssatement should be adjusted based on materiality

Question 17

Documentation—Audit documentation should be in sufficient detail to provide a clear understanding of what? (3)

Answer 17

1. the work performed 2. the evidence obtained 3. the conclusions reached

Question 18

Documentation should have these characteristics

Answer 18

1. Identified with the client’s name, period covered, description of the contents, initials of the preparer, date of preparation, and an index code 2. Files should be indexed and cross-referenced to aid in organization 3. Documentation should clearly indicate the audit work performed through memos, initialing the procedures in the audit program, or tick marks on the schedules 4. Include sufficient information to fulfill the audit objectives 5/ Conclusions reached about the segment of the audit should be clearly stated

Question 19

what are supporting schedules?

Answer 19

prepared by client or auditors in support of specific amounts on the FSs

Question 20

what are the major types of supporting schedules? (8)

Answer 20

1. Analysis 2 Trial balance or list 3 Reconciliation of amounts 4 Substantive analytical procedures 5 Summary of procedures 6 Examination of supporting documentation 7 Informational 8 Outside documentation

Question 21

what is the supporting schedule of analysis?

Answer 21

designed to show the activity in the GL account during the entire period under audit, tying together the beinning and ending balances

Question 22

what is the supporting schedule of trial balance or list?

Answer 22

consists of the details that make up a year end blance of a general ledger account . difference from analysis is includes only those items making up the end of the period balance

Question 23

what is the supporting schedule of reconciliation of amounts?

Answer 23

suports a specific amount and is normally expected to tie the amount recorded in the clients records to another source of info ex. cash blance to bank statement

Question 24

what is the supporting schedule of substantive analytical procedures?

Answer 24

include evidence documenting auditors expectation of the balance in an account as well as other comparisons used in analytical procedures

Question 25

what is the supporting schedule of summary of procedures

Answer 25

summarizes the results of a specific audit procedure

Question 26

what is the supporting schedule of examination of supporting documents?

Answer 26

show detailed test performed , like documents examined during tests of controls

Question 27

what is the supporting schedule of informational

Answer 27

contains info instead of audit evidence. info for tax return and SEC form 10K, time budgets, clients working hours

Question 28

what is the supporting schedule of outside documenation?

Answer 28

ex. confirmation replies and copies of client agreements