Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Audit Part 2 > Chapt 7 Types of Audit Evidence > Flashcards

Chapt 7 Types of Audit Evidence Flashcards

1
Q

why is documentation widely used as evidence in audits?

A

becuase it is usually readily availabe at a relatively low cost

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

why is observation rarely sufficent by itself?

A

because of the risk of personnel changing their behavior because of the auditors presence

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

what is the broad category of evidence “confirmation”?

A

describes the receipt of a direct written response from a third party verifying the accuracy of info that was requested by the auditor

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Would using confirmation for an extraordinarily large sales transaction recorded 3 days before year end be appropriate?

A

it could be

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

rechecking a sample of calculations made by the client is what category of evidence?

A

recalculation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

physical examination evidence is most often associated with what? What is it also applicable to?

A

inventory and cash verification of securities, notes receivable, and tangible fixed assets

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What are the assets often confirmed? (7)

A
  1. Cash in bank 2. Marketable securities 3. A/R 4. N/R 5. Owned inventory out on consignment 6. Inventory held in public warehouses 7. Cash surrender value of life insurance
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

evaluations of financial info through analysis of plausible relationships among financial and nonfinancial data is what type of evidence?

A

analytical procedures

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

what is one possible reason for the unusual fluctuation?

A

the presence of an accounting misstatement

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

although auditors should consider the reliability of documentation, they rarely verify what?

A

the authenticity of documentation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

observation provides evidence about the perfornace of a process or procedure but what is its limiation?

A

it is limited to the point in time at whcih the observation takes place

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

each of the 8 types of evidence has the potential to be what (2)?

A

relevant and timely

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

what is the distinction in auditing between the inspection or physical examination of assets such as marketable securities and cash and the inspection of documents such as cancelled checks and sales documents?

A

if the object being examined, like a sales invoice, has no inherent value, the evidence being inspected is called documentation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

what is the broad category of evidence “observation”?

A

looking at a process or procedure being performed by others

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

looking at a process or procedure being performed by others is what category of evidence

A

observation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

why is a large volume of inspection evidence usually avialable?

A

because each transaction in the clients organization is normally supported by at least one document

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

when auditors use documentation to support recorded transactions or amounts, the process is called?

A

vouching

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

generally, physical examination is an objective means of ascertaining what? (2)

A
  1. the quantity of the asset 2. the description of the asset
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

auditors independent tests of client accounting procedures or controls that were originally done as part of the entitys accounting and internal control system is what type of evidence

A

reperformance

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

why are confimations not ordinarily used to verify individual transactions between organizations such as sales transactions?

A

because the auditor can use documents for that purpose

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

what does compute mean?

A

a calculation done by the auditor independent of the client

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

the auditors examination of the clients documents and records to substantiate the info that is, or should be , included in the FSs is what type of evidence category?

A

inspection

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

what two types of evidence are likely to be highly reliable if the internal controls are effective?

A

physical examination and recalculation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

what is the only account that requires confirmation as the type of audit evidence?

A

A/R

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

what are the 2 most expensive types of evidence?

A

physical examination and confirmation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

what is vouching?

A

when auditors use documentation to support recorded transactions or amounts

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

what is the broad category of evidence “inquiry”?

A

the obtaining of written or oral info from the client in response to questions from the auditor

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
28
Q

what type of document has been prepared and used within the clients organization and is retained without ever going to an outside party

A

internal document

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
29
Q

Auditors decide whether or not to use confirmations depending on the _____ needs of the situation as well as the _____ evidence available

A

reliability alternative

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
30
Q

unusual fluctuations occur when? (2)

A
  1. significant differences are not expected but exist 2. significant differences are expected but dont exist
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
31
Q

what does trace mean?

A

an instruction normally associated with inspection or reperformance. the instruciton should state what the auditor is tracing and where it is being traced from and to. often an audit procedure that includes the term trace will also include a second instruction such as compare or recalculate

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
32
Q

significant unexpected differences between the current years unaudited financial data and other data used in comparisions

A

unusual fluctuations

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
33
Q

if the auditor traces from recieving reports to the acquistions journal to satisfy the completeness objective, the process is called?

A

tracing

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
34
Q

What is considered one of the most reliable and useful types of audit evidence?

A

physical examination

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
35
Q

what type of document has been handled by someone outside the clients organization who is a party to the transaction being documented, but that is either currently held by the client or readily accessible?

A

external document

36
Q

when substantive analytical procedures can be performed, the procedure constitutes what?

A

substantive evidence in support of the related account balances

37
Q

what does an auditor consider if the document is internal when deciding if it is reliable evidence?

A

whether it was created and processed under conditions of effective internal control

38
Q

what does extending invoices mean?

A

to take the amount and multiply by price to make sure it is correct

39
Q

what does examine mean?

A

a reasonably detailed study of a document or record to determine specific facts about it

40
Q

observation is particularly usfule in evaluating the effectivenss of client procedures in what?

A

counting inventory

41
Q

each of the 8 types of evidence has the potential to be relevant and timely depending on what?

A

its source and when the eividence is obtained

42
Q

What are liabilities often confirmed (5)

A
  1. A/P 2. N/P 3. Advances from customers 4. Mortgages payable 5. Bonds payable
43
Q

if the unusual fluctuation is large, what must the auditor do?

A

determine the reason and be satisfied that the cause is a valid economic event and not a misstatment

44
Q

In deciding which audit procedures to use, the auditor can choose from 8 broad categories of evidence which are called types of evidence. what are they?

A
  1. Physical examiniation 2. confirmation 3. inspection 4. analytical procedures 5. Inquires of the client 6. Recalculation 7. Reperformance 8. Observation
45
Q

documents can be classified in what 2 ways

A

internal and external

46
Q

physical examination is a direct means of what?

A

verifying that an asset actually exists (existence object)

47
Q

what does read mean?

A

an exam of written info to determine facts pertinent to the audit

48
Q

when the audito obtains evidence through inquiry, it is normally necessary to alos do what?

A

obtain corroborating evidence through other procedures

49
Q

the inspection or count by the auditor of a tangible asset is what broad category of evidence?

A

physical examination

50
Q

Why are confirmations not used in every instance in which they are applicable?

A

because they are relatively costly to obtain and may cause some inconvenience to those asked to supply them

51
Q

what broad category of evidence describes the receipt of a direct written response from a third party verifying the accuracy of info that was requested by the auditor

A

confirmation

52
Q

what does compare mean?

A

a comparison of info in 2 different locations.

53
Q

why is physical examination costly?

A

requires auditors presence when the client is counting the asset often on the B/S date

54
Q

observation is nornmally done ____ with other audit procedures

A

concurrently

55
Q

what is the broad category of evidence “reperformance”?

A

auditors independent tests of client accounting procedures or controls that were originally done as part of the entitys accounting and internal control system ex. compare price on an invoice to an approved price list or reperfrom the aging of A/R. ex. rechecking transfersw of info by tracing info included in more than once place to verify that it is recorded at the same amount each time

56
Q

why is confirmation costly?

A

auditor must follow careful procedures in the confirmation preparation, transmital, receipt, and in the follow up of nonresponses and exceptions

57
Q

what does scan mean?

A

a less detailed examn of a document or record to determine whether there is something unusual about it to further investigatw

58
Q

T/F Confirmation of A/R is not required by international auditing standards

A

T

59
Q

analytical procedures are used extensively in practice and are required during what phases on all audits?

A

planning and completion phases

60
Q

what is the broad category of evidence “analytical procedures”?

A

evaluations of financial info through analysis of plausible relationships among financial and nonfinancial data

61
Q

why are external documents considerre more reliable evidence than internal ones?

A

because external documents have been in the hands of both the client and another party to the transaction so there is some indication that both members are in agreement about the info and the conditions stated on the document

62
Q

what does recompute mean?

A

a calculations doen to determine whether a clients calculation is correct

63
Q

the obtaining of written or oral info from the client in response to questions from the auditor is what category of evidence

A

inquiry

64
Q

T/F Proper valuation for FS purposes usually can’t be determined by physical examination (accuracy and realizable value objectives)

A

T

65
Q

what is the p[rimary determinant of the auditors willingness to accept a document as reliable evidence?

A

whether it is internal or external

66
Q

What part of Owners Equity is often confirmed?

A

Shares outstanding

67
Q

When practical and reasonable, U.S. auditing standards require the confirmation of a sample of what? why?

A

A/R because A/R usually represent a significant balance on the FSs and confirmations are a highly reliable type of evidence

68
Q

which evidence alone is usually not sufficient to provide appropriate evidence to satisy any audit objective

A

inquiry

69
Q

physical examination is not sufficient evidence to verify what?

A

that existing assets are owned by the client (rights and obligations objective)

70
Q

what is the broad category of evidence “inspection”?

A

the auditors examination of the clients documents and records to substantiate the info that is, or should be , included in the FSs

71
Q

what is the broad category of evidence “ physical examination “

A

the inspection or count by the auditor of a tangible asset

72
Q

T/F AICPA and PCAOB auditing standards refer to inspection of physical assets and inspection of documents as one type of evidence

A

T

73
Q

what are the purpose of conducting analytical procedures in which the current years unaudited info is compared with prior years audited info or industry data?

A
  1. understanding the clinets industry and business….because it will highlight changes that can represent important trends or specific events that will influence the audit planning as it points to things to audit more closely 2. its a usefule indicator for determining whether the client has financial problems which can affect the aduit plan and indicate substantial doubt about their ability to continue as a going concern 3. it can indicate the presence of possible misstaements in the FSs- unusual fluctuations 4. it can be used to provide evidence supporting recorded account balances
74
Q

what does foot mean?

A

addition of a column of numbers to determine whetther the total is the same as the clients

75
Q

Auditing standards provide general guidance in what 3 categories?

A
  1. Qualifications and conduct 2. Reporting 3. Evidence accumulation
76
Q

in some cases, physical examination can be a useful method for evaluating an asset’s what? (2)

A

condition or quality

77
Q

what does count mean?

A

a dermination of assets on hand at a given time. only used with physical examination

78
Q

when can substantive analyutical procedures be performed?

A

when a predictable relationship exists and the procedure is based on reliable inputs

79
Q

the documents examined or inspected by the audito are the records used by the client to do what?

A

provide info for conducting its business in an organized manner

80
Q

what is tracing?

A

f the auditor traces from recieving reports to the acquistions journal to satisfy the completeness objective

81
Q

T/F Because confirmations come from 3rd party sources instead of the client, they are a highly regarded and often used type of evidence

A

T

82
Q

what are unusual fluctuations?

A

significant unexpected differences between the current years unaudited financial data and other data used in comparisions

83
Q

the effectiveness of a clients internal controls has signifcant influence on the ____ of most types of evidence

A

reliability

84
Q

what are the 3 least costly types of evidence?

A

observations, inquiry, and recalculation

85
Q

what is the broad category of evidence “recalculation”?

A

rechecking a sample of calculations made by the client

86
Q

confirmations are seldom used in the audit of fixed asset additions. Why?

A

they can be verified adequately by inspection and physical examination

Audit Part 2 (33 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions