Lecture 1: Introduction and overview

Question 1

What are the different types of audits

Answer 1

-financial statement audit
-environmental audit
-comprehensive audit
- internal audit
-performance audit
-compliance audit

Question 2

What are the different types of auditors

Answer 2

• external auditors
  -internal auditor
  -government auditors
• tax auditors

Question 3

what are examples of main management assertions?

Answer 3

1. Existence
2. Rights and obligations
3. Valuation or allocation
4. Completeness
5. Presentation or disclusure

Question 4

What is the existence assertion?

Answer 4

*whether assets, equities, obligations included on the BS actually existed on the date of the balance sheet

*transaction recorded occured during the accounting period
-Auditor tests for overstatement of items

Question 5

What is the rights & obligations assertion

Answer 5

*Audit client possesses ownership rights to recorded assets.
*Client records show liabilities owed as of the balance sheet date.
-auditor tests asset ownership and liability claims

Question 6

what is the valuation & allocation management assertion

Answer 6

*All asset, liability, equity, revenue, and expense accounts have been included in the financial statements at appropriate amounts.
- auditor tests whether account balances are valued and allocated in accordance with accounting standards

Question 7

What is the completeness management assertion

Answer 7

*All transactions and accounts that should be presented in the financial statements are included
- auditor tests for understatement of items

Question 8

What is the representation and disclosure management assertion?

Answer 8

*Financial statement components are properly combined or separated, classified, described and disclosed.
- Auditor tests whether financial statements are presented in accordance with accounting standards

Question 9

why is an independent auditor asked to express an opinion on the fair presentation of financial statements?

Answer 9

The opinion of an independent party is needed because a company maynot
be objective with respect to its own financial statements

Question 10

What are the different elements of quality control under ASA 200?

Answer 10

1. Leadership responsibilities for quality on audits
2. Ethical requirements – e.g., independence
3. Client evaluation – Acceptance & continuance
4. Assignment of engagement teams
5. Engagement performance
6. Monitoring
7. Documentation

Question 11

What are the transaction related audit objectives?
assertions-> general audit objectives

Answer 11

1. occurence->existence
2. Accuracy/ valuation & allocation-> posting and summarisation or accuracy
3. classification-> classification
4. cut off-> timing
5. completeness-> completeness

Question 12

What are the balance related audit objectives?
assertions-> general audit objectives

Answer 12

1. existence-> existence
2. rights and obligations-> rights and obligations
3. completeness-> completeness
4. Valuation & allocation (has sub categories)
   - accuracy
   -timing
   - cut off
   -detail tie
   - realisable value