Chapter 7 Flashcards
What four major decisions does an auditor must make regarding what to gather and how much to accumulate? (4)
- Which audit procedures to use?
- What sample size to select for a given procedure?
- Which items to select from the population?
- When to perform the procedures?
What does audit program includes?
An audit program, also called an audit plan, is an action plan that documents what procedures an auditor will follow to validate that an organization is in conformance with compliance regulations. … The framework should explain the audit’s objectives, its scope and its timeline.
What is sufficiency of evidence
refers to the quantity of evidence obtained.
What are the 2 factors of the samples sizes?
- The auditor’s expectation of misstatements
2. The effectiveness of the client’s internal controls
What is Appropriateness mean?
refers to the quality of evidence obtained
What is Appropriateness depended on? (2)
- Relevance of evidence means that the evidence must pertain to or be relevant to the audit objective that is being tested.
- Reliability of evidence refers to the degree to which evidence is believable or worthy of trust.
Reliability depends on the following characteristics: (6)
- Independence of provider
- Effectiveness of client’s internal controls
- Auditor’s direct knowledge
- Qualifications of individuals providing the information
- Degree of objectivity
- Timeliness
What is the Combined Effect?
The persuasiveness of the evidence can be evaluated only after considering the combination of appropriateness and sufficiency.
How many types of Audit Evidence are there? (8)
(8)
- Physical examination
- Confirmation
- Inspection (documentation)
- Analytical procedures
- Inquiries of the client
- Recalculation
- Reperformance
- Observation
Physical examination
The inspection or count of a tangible asset by the auditor.
Confirmation
Receipt of a written or oral response.
Inspection (documentation)
The auditor’s examination of the client’s documents (internal or external) and records to substantiate the information in the financial statements. Using documents to support recorded transactions (occurrence) is called vouching. Testing from source documents to recorded amounts (completeness objective) is called tracing.
Analytical procedures
Comparisons and relationships used to assess whether account balances or other data appear reasonable
Inquiries of the client
Obtaining written or oral information from the client.
Recalculation
Repeating a sample of calculations made by the client.