Chapter 5 Flashcards
Comparing a sample of shipping documents to related sales invoices is testing for what management assertion.
Completeness
In testing the existence assertion for an asset, an auditor ordinarily works from the…
Accounting records to the supporting documents
The measure of reliability of audit evidence lies in the auditor’s judgement (T/F)
True
Vouchering goes from what to what, and determines what management assertion?
From the GL to the Source Documents, testing the Occurrence assertion
Tracing goes from what to what, and determines what management assertion?
From the Source Document to the GL, testing the Completeness assertion.
The assurance bucket is filled in what order?
1) Risk Assessment
2) Test of Controls
3) Substantive Analytical Procedures
4) Test of Details
What is the primary purpose of final analytical procedures?
Assist the auditor in assessing the validity of the conclusions reached.
The substantive analytical procedure know as Trend Analysis is best described by…
The examination of changes in an account over time.
An audit document that reflects the major components of an amount reported in the financial statements.
Lead Schedule
Audit documentation is property of who?
The Auditor
What two functions do working papers serve per auditing standards?
1) Support for the Audit Report
2) Planning, Performance, and Supervision
An auditor can rely purely of test of controls for assurance (T/F)
False
Confirmations relate to which to assertions
1) Completeness
2) Existence
What are two forms of low reliability types of evidence
1) Observations
2) Inquiries
What are three forms of highly reliable audit evidence
1) Recalculation
2) Reperformance
3) Inspection of Tangible Assets
The bulk of audit evidence is gathered how?
Inspection of records or documents
Audit evidence must of what two qualities
Sufficient and Appropriate
The characteristics of Sufficiency and Appropriateness of audit evidence has what type of relationship?
Inverse
The nature of Audit evidence refers to what?
Form
What is one way to receive more reliable evidence from an audit client?
Better Internal Controls
Assertions about Classes of Transactions and Events
1) Completeness
2) Cutoff
3) Classification
4) Authorization
5) Accuracy
6) Occurence
Assertions about Account Balances
1) Completeness
2) Existence
3) Rights & Obligations
4) Valuation & Allocation
Assertions about Presentation and Disclosure
1) Completeness
2) Accuracy & Valuation
3) Occurrence & Rights & Obligations
4) Classification & Understandability
The heading of audit documentation must include what?
- Name of the Client
- Title of Working Paper
- Client’s Year-End Date
Concepts of Audit Evidence
- Nature
2. Sufficiency & Appropriateness
Appropriate Evidence refers to what
Quality
Sufficient Evidence refers to what
Quanity
How long must an auditor keep audit documentation?
7 years
The relevance of audit evidence depends on the assertion being tested (T/F)
True
The auditor must use his or her professional judgement to determine the amount of audit evidence to be gathered (T/F)
True
In testing PPE balances, and auditor may physically inspect new additions listed on the summary of PPE transaction for the year. What assertion T&E assertion is being tested?
Occurence
What is the primary purpose of audit procedures?
To gather corroborative evidence about management’s assertions
A confirmation is used to…
Verify a representation from a third party
Vouchering is used primarily to test what type of assertion about classes of transactions.
Occurrence
In determining whether transactions have been recorded, the direction of the audit testing should start from the…
Original source document
A company’s accounting data cannot be considered sufficient audit evidence to support the financial statements (T/F)
True
Relationship within which financial statement tend to be most predictable for purposes of analytical procedures applied as substantive procedures?
Income Statement
