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Assurance > Chapter 11 - Evidence and sampling > Flashcards

Chapter 11 - Evidence and sampling Flashcards

1
Q

What are the procedures outlined in ISA 500 for obtaining evidence?

A
  • Inspection of documentation
  • observation
  • Inquiry
  • External confirmation
  • Recalculation
  • Reperformance
  • Analytical procedures
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2
Q

What are the 3 main types of computer assisted audit techniques (CAAT)?

A
  • Test data
  • Audit software
  • Data analytics
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3
Q

How is test data used?

A

Assurance provider supervises the process of running data through the client’s system

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4
Q

Can dummy data used?

A

Yes, but assurance provider must be very careful to reverse all effects

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5
Q

Can real data used?

A

Yes, but data may not contain all the errors necessary to test controls rigorously

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6
Q

What is the safest approach when running dummy data?

A

Run dummy data against a verified copy of client’s system

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7
Q

What does audit software make use of?

A

Assurance provider’s own specialised software

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8
Q

On what basis does audit software work?

A

Basis of interrogating client system and extracting/analysing info

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9
Q

What can audit software do?

A
  • Substantive procedures
  • Extract samples
  • Check calcs
  • Prepare reports
  • Anything that doesn’t require a judgement
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10
Q

What are the applications of data analytics?

A
  • Reperforming calcs
  • Analysing entire populations
  • Matching transactions
  • Data comparisons
  • Analysing revenue trends
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11
Q

What ISA provides details on the use of analytical procedures?

A

ISA 520

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12
Q

What does ISA 520 describe?

A

How the auditor must decide whether using substantive analytical procedures will be effective and efficient at reducing risk

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13
Q

When should analytical procedures be used?

A

At risk assessment stage

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14
Q

For any item directionally tested, what are the 2 possible results?

A

Fairly stated or misstated

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15
Q

What figures are estimated?

A
  • Product warranties
  • Depreciation
  • Inventory
  • Receivables allowances
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16
Q

What is the audit approach set out in?

A

ISA 540

17
Q

What are the different methods to the audit approach?

A
  • Test process already used
  • Point estimate
  • Review events
  • Test controls
18
Q

What does ISA 530 state about audit sampling?

A

Must provide a reasonable basis for auditor to draw conclusions

19
Q

What is audit sampling?

A

Application of audit procedures to less than 100% of items in population

20
Q

What is statistical sampling?

A

Random selection and the use of probability to evaluate sample results

21
Q

What is non-statistical sampling?

A

Any approach that doesn’t qualify as statistical

22
Q

What specific characteristics may auditors look for when using selective sampling?

A
  • High value/key items
  • Items over a certain amount
  • Items that provide info
23
Q

What does ISA 530 state about audit sampling?

A

When designing an audit sample, auditor must consider specific purpose to achieve

24
Q

When is tolerable misstatement considered?

A

During the planning stage and is related to the auditor’s judgement about materiality

25
Q

When is sequence/block selection used?

A

To check item characteristics

26
Q

What is Money Unit Sampling?

A

MUS ensures that every £1 in a population has an equal chance of being selected for testing

27
Q

What must the auditor do with misstatements?

A

Project them from the sample onto the relevant population

28
Q

What does ISA 450 require from an auditor?

A

Evaluate the effect of identified misstatements on the audit

29
Q

What can the auditor request from management if misstatements aren’t corrected?

A

Written representation from management to prove misstatements are immaterial

30
Q

How is the cost of inventory confirmed?

A

Inspection of purchase invoice

31
Q

What gives better evidence, inquiry of 3rd party or entity insiders?

A

3rd party

32
Q

How must the auditor’s report be signed when working remotely?

A

May be signed electronically and published online

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