MODULE 17 Flashcards

1
Q

What are Assertions?

A

Something that allows us to make sure the financial statements are properly recorded

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2
Q

What are the two types of assertions?

A

Transactional Assertions

Balances (Balance sheet) Assertions

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3
Q

What are the transaction Assertions, and explain them:

A
  1. Occurrence - Did the transaction actually occur?
  2. Completeness - Have we recorded all of our transactions
  3. . Accuracy - Have we recorded every transaction accurately? Have we used correct price/ quantity?
  4. Cut-off - Have we used the correct financial period
  5. Classification- Have transactions been used in the correct account?
  6. Presentation - How things look in the financial statements
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4
Q

What are the Balance Assertions, and explain them:

A
  1. Existence - Does the assets really exist?
  2. Rights and Obligations- Do I owe a liability therefore an obligation,, do I own an asset to have the right to record it?
  3. Completeness- Have we recorded everything?
  4. Accuracy, valuation and allocation - Are the balanced recorded at accurate amounts, have we valued assets correctly?
  5. Classification-Have balances been recorded in the proper accounts?

Presentation - are balances properly segregated, are they properly described?

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5
Q

Why are assertions important?

A

Because, if we can gather evidence to provide all assertions have been met, then the account Is free from material misstatement

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6
Q

What does sufficient and appropriate evidence mean?

A

Sufficiency - Measure of quantity of evidence

Appropriateness - is it relevant and reliable?

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7
Q

What are the 3 sources of reliability?

A

Auditor generated - Created by processes

Client generated- Included Accounting Records, internal documents etc. Which are all under control of directors

Third party/ externally generated - Bank statements

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8
Q

What 4 categories are there for evidence in nature?

A

Natural Evidence- The auditor physically witnesses the event or the asset

Created evidence - for e.g invoices, letters from clients banks

Rational Argument - Evidence through applying logic, for e.g checking the reasonableness of a depreciation figure

Testimonial evidence Spoken evidence, such as conversations

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9
Q

How to determine sufficiency;

A

Level of materiality
The assessed ROMM of the figure being tested
The sources and quality of availability evidence

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