Evidence and Sampling Flashcards
What are the computer assisted audit techniques?
Test data, audit software, data analytics
What is test data?
Testing integrity of client’s system by posting data onto client system to check the system posts the transactions correctly, eg password controls
What is audit software?
Auditor uses own software to test balance/transactions
What is data analytics?
Using IT to identify patterns or trends to review 100% of the population
When are analytical procedures used?
In the planning stage and substantive procedures
What are some sources of info about the client?
Interim financial info
Prev financial statements
Budgets
Management accounts
Non-financial info
Board minutes
What should be considered when using analytical procedures as substantive procedures?
Objective and suitability of analytical procedures
Reliability of data
How do we test for an overstatement or understatement?
Existence/occurrence
Completeness
What are some accounting estimates?
Product warranties, depreciation, inventory, useful life, accruals and provisions
How to test for estimates?
Review accuracy of prior year estimates to actual results
Review subsequent events for accuracy of estimate
Independent expert to estimate for comparison
Review process used by management
What are statistical sampling methods?
Random
Systematic
Monetary unit sampling
What are non-statistical sampling methods?
Haphazard selection
Block sampling
What factors increase sample size?
Increase in risk of material misstatement
Increase in desired level of assurance
Increase in amount of misstatement
Decrease in use of analytical procedures
What is considered when determining if a misstatement is material?
Size and nature
What circumstances allow misstatements to be material when lower than materiality?
Affects compliance with regulatory requirements, debt covenants or regulatory requirements
Masks change in earnings/trends
Affects ratios used to evaluate financial position
Involves management compensation
