Nature Of Evidence 1 Flashcards
Reliability?
Directly, independent source outside the entity, internally, documents, and original docs
Appropriateness (relevant and reliable)
An effective internal control provides not assurance about the reliability of evidential matter
Completion
No omissions, all assets liabilities and equity are recorded.
The standard control for completeness is controlling pre numbered forms.
Test from detail (supporting documents) into accounting record (voucher register)
Compare securities on hand with those recorded to ensure that all recorded securities were held
-record all sales with cash register tape evidencing the sale
Existence/occurrence
Assets liabilities and equity exist
Tests from the accounting record (voucher register)
to the detail of the test (supporting doc)
Compare inventory records with goods on hand
Valuation/allocation
Test controls over computations or other valuation aspects.
Testing credit approval before shipping goods to customers addresses to the collectibility of accounts receivable and reduce the number of bad debts and this help value accounts receivables
Rights/obligations
Test controls which ensure that the vouchers items are valid liabilities of the entities
- entity’s right to an asset obligation for a reliability
- entity holds or controls rights to assets and liabilities are obligations of entities
- follow up on errors show that a customer exist and that the receivables are valid so the client has rights to the assets
Can accounting data by itself be considered sufficient evidence?
No
What is the most effective way of reducing risk and is reliable?
Examining evidence (internal and external records docs and assets)
Do transactions and events distinguish between “accounting balances at year end”?
Yes
What are the assertions regarding “account balances at period end”?
Existence
Completeness
Rights or obligations
Valuation and allocation
Prenumbered purchase order forms are the least persuasive type of audit evidence among those listed.
True
Sufficiency
An auditors opinion to be useful must be formed with reasonable time and based on evidence obtained at a reasonable cost
Quantity to support conclusion
Cutoff
Transactions and events have been recorded in the proper period
AICPA does not require auditor to address cutoff separately as long as occurrence and completeness have been established.
Accounting records are considered audit evidence
True
The most persuasive evidence is obtained from outside sources
true
“transaction and events” and “balance at year end” are two different things
true
