Module 1 - Review of Audit Theory Flashcards
What are the 4 phases of the Audit?
Phase 1: Plan and design audit approach
Phase 2: Perform tests of controls and substantive tests of transactions
Phase 3: Perform analytical procedures and tests of details of balances
Phase 4: Complete the audit and issue an audit report
Phase 1
Provide a brief description of the actions the auditor takes:
- Determine whether to accept client
- Understand client’s business/industry and risks
- Perform preliminary analytical procedures
- Set materiality
- Assess control risk
- Develop audit program
Phase 2
What are the steps of this phase of the audit?
Phase 3
Provide a brief summary of the steps of this phase:
- Sometimes: Perform substantive analytical procedures that assess overall reasonableness of transactions/balances
- Perform tests of key items
- Perform additional tests of details of balances that tests for monetary misstatements
Phase 4
What are the steps of this phase of the audit?
Use this card to study the main transaction cycles and their relationships with other cycles:
Use this card to understand Management assertions for each account category:
What are the general transaction-related audit objectives?
- Occurence
- Completeness
- Accuracy
- Posting and summarization
- Classification
- Timing
What do these transaction-related audit objectives refer to:
- Occurence
- Completeness
- Accuracy
Occurence: Recorded transactions exist
Completeness: All transactions that should be included are
Accuracy: Transactions are recorded at correct amounts
What do these transaction-related audit objectives refer to:
- Posting and summarization
- Classification
- Timing
Posting and summarization: Transactions are included in master files and correctly summarized
Classification: Transactions are properly classifed
Timing: Transactions recorded on correct dates
What are the general Balance-related audit objectives?
- Existence
- Completeness
- Accuracy
- Classification
- Cutoff
- Detail tie-in
- Realizable value
- Rights and obligations
What do these balance-related audit objectives refer to:
- Classification
- Cutoff
- Detail tie-in
Classification: Are the amounts included in the correct account
Cutoff: Transactions recorded in proper period
Detail tie-in: Account balances agree with master file and general ledger amounts
What do these balance-related audit objectives refer to:
- Realizable value
- Rights and obligations
Realizable value: Assets included at estimated realizable value
Rights and obligations: Assets must be owned
What decisions must be made when determining the type of evidence to gather?
- Audit procedures to perform
- Sample size to collect
- Items to select
- Timing of procedures
What are the types of audit tests that can be performed?
Risk assessment procedures
Tests of controls
Substantive tests of transactions
Analytical procedures
Tests of details of balances
What are the steps in applying materiality?
