Evidence

Question 0

To be appropriate, evidence must be

Answer 0

Both reliable (valid) and relevant

Question 1

Assertion of class of transaction

Answer 1

Accuracy
Classification
Completeness
Cutoff 
Occurrence

Question 2

Assumptions

Answer 2

In evaluating the reasonableness of estimates, auditor normally concentrate on assumptions that are susceptible to bias.

Question 3

Analytical procedure

Answer 3

Required to use in the risk assessment stage (planning stage) and near audit completion (overall review stage), not likely to be done in internal control stage

Income statement accounts are most predictable for analytical precedure

Question 4

Test of details

Answer 4

Objective of test of details as a substantive procedure is to detect material misstatement

Question 5

Documentation

Answer 5

Required documentation =the overall strategy and audit plan

Audit documentation should be retained at least 5 years
(PCAOB=7years)

No deletion of audit documentation after documentation completion date

Question 6

Kiting

Answer 6

A form of fraud that overstates cash by simultaneously including it in two or more bank accounts

Question 7

Inspection of loan agreement under which an entity’s inventories are pledged →support management financial support assertion of ?

Answer 7

Presentation and disclosure

Question 8

Representation letter

Answer 8

• Do not include future plans
• includes completeness and availability if minuets of stockholders’ and director’s meeting
• includes information on compensating balances and other arrangements involving restrictions in cash balances

Question 9

Layer’s letter

Answer 9

The lawyer and auditor should understand limit of materiality

Question 10

Negative confirmation

Answer 10

May be used when when

• the combined assessed level of inherent risk and control risk is low
• a large number of small balances is involved
• the auditor has no reason to believe that recipients of the request are unlikely to give them consideration

Question 11

Related party

Answer 11

• An auditor primarily emphasis on evaluating the disclosure of Related party transactions
• Audit procedures directed toward identifying related-party transactions should include considering wether transactions are occurring

Question 12

Kiting

Answer 12

Checkの付け替え
Checkのdrawingとdeposite重複でCash多く見せる
→bank transfer schedule

Question 13

Lapping

Answer 13

The method involves taking the first receivable collected and using that to cover the theft, while the second receivable collected is accounted to the first, the third receivable to the second, and so on