Chapter 5 - Evidence and Discrimination Flashcards
** Star - Management Assertions about Classes of Transactions & Events**
Occurence
Completeness
Authorization
Accuracy
Cutoff
Classification
Presentation
Management Assertions about Account Balances
Existence
Rights & Obligations
Completeness
Accuracy, Valuation, and Allocation
Classification
Presentation
What is Audit Evidence?
The info used by the auditor in arriving at the conclusions on which the audit opinion is based
What is the Nature of Evidence?
The form or type of evidence we use
Accounting Records as Evidence Types
Records of initial entries and supporting records
Ledgers, journal entries, etc.
Worksheets and spreadsheets supporting computations, disclosures, etc.
Contracts
Other Evidence Types
Confirmations from 3rd Parties (best)
Minutes of meetings
Industry analysts’ reports
Comparable data about competitors
Control manuals
Star - Define Sufficiency of Audit Evidence
Sufficiency is the measure of the quantity of audit evidence. Greater risk of misstatement requires a higher quantity.
Define Appropriateness of Evidence
Appropriateness is the measure of the quality of audit evidence (relevance and reliability).
What are Some examples of Reliability for Evidence?
Independent source outside the entity
Effectiveness of internal control
Original documents
What are Some Acts Performed by the Auditor to Gather Evidence?
Risk assessment procedures
Test of controls
Substantive procedures
Star - Substantive Audit Procedures for Obtaining Evidence (1-3)
Inspection (Physical inspection and Observation)
Inquiry
Confirmation
Star - Substantive Audit Procedures for Obtaining Evidence (4-7)
Recalculation: Checking mathematical accuracy of documents or records
Reperformance: Independent execution of procedures or controls.
Analytical Procedures
Scanning
Higher Reliability Evidence Procedures
Inspection of an asset
Reperformance
Recalculation
Medium Reliability Evidence Procedures
Inspection of documents
Confirmation
Analytical Procedures
Lower Reliability Evidence Procedures
Observation
Inquiry
Audit Documentation has 3 Purposes
- Provide support for audit report
- Aid in the planning, performance, and supervision of the audit
- Provide a basis for quality reviews
Audit Documentation Should:
Include a written audit program detailing audit procedures necessary to accomplish audit procedures.
Also, enable an experienced reviewer to determine who performed the audit as well as the dates of the work and reviews.
Two Types of Audit Documentation
Permanent files (carry year over year)
Current files
What is the Format of Audit Documentation?
Heading
Indexing and Cross-Referencing
Tick Marks
Who Owns the Audit Documentation?
All audit documentation is owned by the auditor
What are Substantive Procedures?
Substantive procedures include tests of details and substantive analytical procedures
Star - What are Substantive Analytical Procedures?
Procedures used to obtain evidential matter about particular assertions related to account balances or classes of transactions.
(ESSAY QUESTION) What are the 3 types of analytical procedures?
Risk Assessment Procedures
Substantive Analytical Procedures
Final Analytical Procedures
(ESSAY QUESTION) What are Risk Assessment Procedures?
They assist the auditor to better understand the business and to plan the nature, timing, and extent of audit procedures.
(ESSAY QUESTION) What are Substantive Analytical Procedures?
A substantive procedure to obtain evidential matter about particular assertions related to account balances or classes of transactions.
(ESSAY QUESTION) What are Final Analytical Procedures?
Procedures used as an overall review of the financial information in the final review stage of the audit.
