Evidence and Risk 3 Flashcards
11 Management Assertions are groupe in 3 Categories
3 Categories
- Transaction Classes & Events
- CPA CO
- Account Balance – at year end
- RACE
- Presentation & Disclosures
- RACU
Transaction Classes & Events
CPA CO
CPA CO
- Completeness
- Period Cutoff
- Accuracy
- Classification
- Occurrence
Account Balance – at year end
RACE
RACE
- Rights & Obligations
- Allocation & Valuation
- Completeness
- Existence
Presentation & Disclosures
RACU
RACU
- Rights & Obligations
- Accuracy & Valluation
- Completeness
- Understandability
Audit Program
- Audit program is a detailed list of the audit procedures to be performed in the course of an audit.
- Financial statement → Assertions → Audit Objectives → Audit Procedure → Audit Program
2 approaches for auditing an account
- Test of Balance: direct test the ending balance - many transactions, small dollar amounts, high turnover (cash, A/R, Inv, A/P)
- Test of Transaction: test input and output during the year - few transactions, large dollar amounts, low turnover (investment, PP&E, Bonds, N/P, stockholder equity)
Audit Objective
The auditor develops specific audit objectives in order to substantiate assertions that are material to the financial statement.
Whose property are audit documentation (audit workpapers)? In what form must they be?
- Audit workpapers are the property of the auditor
- They can be paper or electronic
- AU-C300 They must include a WRITTEN audit program (either paper or electronic)
- objectives of documentation is to provie sufficient and appropriate record of the basis and that the audit was planned and performed in accordance with GAAS
What is the Current File?
- Corrobating Information pertaining to the current year’s audit
- Example: Audit program, working trial balance, lead schedules, response to information requests, reconciliations and analysis by the auditor,Bank reconciliation
What is the Permanent File?
- contian Information used for this audit and future audits which is updated as needed
- Examples: Organization documents, Minutes, Flowcharts of the internal control structure, Debt agreements, Analyses of equity accounts, Depreciation schedules
How long must audit workpapers be maintained?
- Must be kept for 5 years after the audit release date or according to regulations whichever is longer AU-C 230
- Must be kept for 7 years or period required by law under PCAOB Audit Standard 3 AS3 - for audit of public companies reporting to SEC
- PCAOB AS3 audits also require an Engagement Completion Document
What is the primary requirement for audit workpapers besides being written?
- Any experienced auditor having no prior connection with the engagement should be able to look at your work and understand what you did
- The workpapers must contain support for the auditor’s conclusions concerning significant aspects of the examination
How should documents added to work papers be treated?
If further documents are added to the work papers after the audit report is issued it must be documented as to who added them why they were added and any effects on the audit report
Documents completion period
- After the audit report is releasedthe firm has 60 days to subtract from the file. You can still add to the file if you document it but you cannot delete any information after 60 days.
- AS3 - for SEC auditors the PCAOB only allows deletions up to 45 days after issuance of the audit report
Kitting
- Kitting is an form a fraud by the client to overstate the total cash in bank by reporting a receipt in the current period without reporting the equivalent disbursement
- Kitting occurs when the disbursement per books occurred after year end but the receipt occurred before year-end
- is best detected through the use of a bank transfer schedule
