Intro to auditing individual Areas

Question 0

Audit procedure for completeness

Answer 0

Cutoff test (trace doc to records to look for omissions)

Analytical procedures- calculate ratio or compare something specific, be specific!

Question 1

Audit procedure for existence

Answer 1

Confirmation (cash, AR, inventory, investment)

Observation (investment/inventory held by others & inventory)

Agree to docs (agree from record to docs to evaluate appropriateness)

Question 2

Audit procedure for rights and obligations

Answer 2

Inquire of applicable personnel

Examine authorization of transactions-ascertain whether any unusual conditions apply

Question 3

Audit procedure for valuation and allocation

Answer 3

Recalculate account balances

Trace cash receipts or disbursement

Analytical procedures (review aged trial balance for AR. Test accuracy by reviewing invoices; review receivers and returns of sales)

Examine price quotations for fair value measurements (verify that they add up and evaluate fairness of general ledger account; see if records agree)

Question 5

Substantive procedures in every audit area

Answer 5

Tests of Controls is NOT s substantive procedure

1) Agree the financial statement elements to the records
2) Scan for unusual items
3) Make inquiries of management and personnel and document in management representation letter
4) Perform specific analytical procedures by considering historical tends and events within the industry

Question 6

Which assertion is relevant to assets (accounts receivable?

Answer 6

Existence/Occurrence