Chapter 7 Flashcards
audit procedure
the detailed instruction that explains the audit evidence to be obtained during the audit
audit program
list of audit procedures for an audit area or an entire audit
appropriateness of evidence
a measure of quality of evidence, meaning its relevance and reliability in meeting audit objectives for classes of transactions, account balances , and related disclosures
relevance of evidence
evidence has to be appropriate
reliability characteristics
independence of provider
effectiveness of client’s internal controls
auditor’s direct knowledge
qualifications of individuals providing the information
degree of objectivity
timeliness
sufficiency of evidence
measured primarily by the sample size the auditor selects
types of audit evidence
- physical examination
- confirmation
- inspection
- analytical procedures
- inquiries of the client
- recalculation
- reperformance
- observation
physical examination
the inspection or count by the auditor of a tangible asset
confirmation
the receipt of a direct written response from a third party verifying the accuracy of info that was requested by the auditor
inspection
the auditor’s examination of the client’s documents and records to substantiate the info that is or should be, included in the financial statements
internal document
document used within the client’s organization and is retained without ever going to an outside party
external document
has been handled by someone outside the client’s organization who is a party to the transaction being documented, but which is either currently held by the client or readily accessible
vouching
when auditors use documentation to support recorded transactions or amounts, the process is called this
tracing
when an auditor traces from receiving reports to the acquisitions journal to satisfy the completeness objective it is called this
unusual fluctuations
significant unexpected differences between the current year’s unaudited financial data and other data used in comparisons
inquiry
obtaining of written or oral info from the client in response to questions from the auditor
recalculation
rechecking a sample of calculations made by the client
reperformance
the auditor’s independent tests of client accounting procedures or controls that were originally done as part of the entity’s accounting and internal control system
observation
consists of looking at a process or procedure being performed by others
audit documentation
record of the audit procedures performed, relevant audit evidence, and conclusions the auditor reached
301 Code of Professional Conduct
a member shall not disclose any confidential information obtained in the course of a professional engagement except with the consent of the client
SEC requires that auditors maintain the following documentation
working papers or other documents that form the basis for the audit of the company’s annual financial statements or review of the company’s quarterly financial statements
memos, correspondence, communications, other documents and records, including electronic records, related to the audit or review
permanent files
contain data of a historical or continuing nature pertinent to the current audit
usually includes:
extracts or copies of company documents
analyses from previous years accounts that continue
info related to understanding internal control
results of anlytical procedures form previous years audits
current file
include all audit documentation applicable to the year under audit
working trial balance
general ledger accounts and their year end balances
lead schedule
contains detail for the corresponding line on the trial balance
supporting schedules
prepared by the client or the auditors in support of specific amounts on the financial statements
analysis
designed to show the activity in a general ledger account during the entire period under audit, tying together beginning and ending balances
trial balance or list
this type of schedule consists of the details that make up a year end balance of a general ledger account
reconciliation of amounts
supports a specific amount and is normally expected to tie the amount recorded in the client’s records to another source of information
tests of reasonableness
contains info that enables the auditor to evaluate whether the clients balance appears to include a misstatement considering the circumstances in the engagement
summary of procedures
summarizes the results of a specific audit procedure
examination of supporting documents
designed to show detailed tests perfomred
informational
contains info as opposed to the audit evidence
outside documentation
documentation gathered by the auditor in the course of the audit
