Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Audit > SU 07 Audit Evidence > Flashcards

SU 07 Audit Evidence Flashcards

1
Q

What is the relationship between control risk and substantive testing

A

Direct

(lower control risk = less substantive testing required)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

When does the initial assessment of controls occur

A

During audit planning

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

What are the types of substantive procedures

A
  • Test of details
  • analytical procedures
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Tests of details

A

Tests for misstatements - sampling or data analytics involved

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Analytical procedures

A

compares the expected results to the actual

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Simplest form of analytical procedures

A

ratio analysis

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What is the purpose of the evidence collected by an audit

A

“The auditor must obtain sufficient appropriate audit evidence by performing audit procedures to afford a reasonable basis for an opinion regarding the financial statements under audit.”

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What is the purpose of audit procedures

A

to test (and gather evidence about) management assertions regarding the financial statements

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Categories of assertions

A

Transactions and events
account balances
presentation and disclosure

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What assertions address classes of transactions and events

A
  • Occurrence
  • Completeness
  • Accuracy
  • Cutoff
  • Classification
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What assertions address account balances (at period end)

A
  • Existence
  • rights and obligations
  • completeness
  • accuracy (valuation and allocation)
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What assertions address presentation and disclosure?

A
  • Occurrence
  • rights and obligations
  • completeness
  • Classification (and understandability)
  • Accuracy (and valuation)
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What assertion is tested using tracing

A

Completeness - tracing the process of documentation forward from source dogs to financial statements

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What assertions are tested using vouching

A

Existence or occurrence- working backwards from what is recorded in the statements to original documentation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What makes evidence quality evidence

A

It must be sufficient and appropriate based on the acceptable detection risk (RMM - IR - CR)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

What makes for sufficient evidence

A

there needs to be enough quantity (volume) of evidence given the RMM

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

what is the relationship between quantity of evidence and RMM

A

Direct - higher RMM = more evidence required lower equal s less

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

How does the quality of evidence effect the quantity of evidence needed

A

Inverse connection
- higher quality evidence requires less quantity

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

What makes for appropriate evidence

A

quality of evidence - determined by relevance and reliability

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

What makes evidence reliable

A
  • good source (independent of and external to client ideal)
  • produced under proven effective IC
  • obtained directly by auditors
  • documentary
  • consists of original documents (not photocopies)
21
Q

Factors to consider regarding appropriate evidence

A
  • evidence must be PERSUASIVE (convincing is not required/ always possible)
  • cost benefit analysis is acceptable but not a reason to omit necessary tests)
  • insufficient testing could result in a charge of negligence
22
Q

What do tests of controls look at

A

whether internal controls are implemented and operating effectively

23
Q

why have analytical procedures been judged ineffective for providing evidence regarding cash-related assertions

A

Because it’s too fluid and you can’t pinpoint where the inaccuracy occurred. Also businesses generally have a volatility of cash because people may charge or not

24
Q

Standard audit procedures for gathering evidence

A
  • inspection (records or documents)
  • Inspection (physical assets)
  • observations (processes/ procedures)
  • inquiry (from knowledgeable sources)
  • confirmation (with 3rd party)
  • Recalculation (for mathematical accuracy)
  • Re-performance (of procedures/ controls)
  • Analytical procedures (relationships between data)
25
Q

CAATs

A

Computer-assisted audit techniques

26
Q

GAS

A

generalized audit software

27
Q

confirmations

A

requests for information from 3rd parties

28
Q

Confirmation process

A
  • select items to confirm (use sampling)
  • design request
  • communicate request to 3rd party
  • received response
  • evaluate response (for meaning and reliability)
  • Alternate Procedures for Non-Responses (PRN)
29
Q

What accounts must be confirmed with 3rd parties?

A

Accounts receivable
Bank accounts

if not done must document why, what alternative procedures were used

30
Q

What assertions can be addressed with confirmations

A
  • existence
  • rights and obligation
  • completeness (BUT ONLY IF WELL DESIGNED)
31
Q

What assertions can NOT be tested with confirmations

A

Valuation
- 3rd party unlikely to be an expert

32
Q

Using bank confirmation to test completeness

A

Ineffective - only accounts listed are confirmed so does not test existence of other accounts unknown to 3rd party

33
Q

Positive confirmation

A

requests a response either to confirm or correct information

34
Q

Negative confirmation

A

Requests a response only if 3rd party has corrects/ disagrees with info

requires auditor control to determine if non-responses are confirmation of correctness or just lack of response)

35
Q

Who keeps custody of the confirmations

A

auditor, never the client

36
Q

Who keeps custody of the confirmations

A

auditor, never the client

37
Q

Electronic confirmation option

A

confirmation.com

38
Q

What is risk-based auditing

A

Prioritizing gathering evidence regarding high-risk accounts

now automated in audit software

39
Q

what is the rule about using email confirmations

A

must do a follow-up call to verify the right person answers the email (pertinent questions to confirm identity)

40
Q

What types of accounts are high-risk

A
  • Where numbers are easily manipulated (significant estimates involved)
  • large accounts
  • history of misstatement/fraud (revenue account)
41
Q

What are automatically high-risk accounts

A

Inventory
Cash

42
Q

Considerations for risk-based auditing

A

Consider
- what accounts are high risk
- what management assertion needs to be tested
- what standard audit procedure would you use to test the assertion

43
Q

Auditing procedures to test completeness

A
  • Tracing (inspection)
  • analytical review
  • observation
44
Q

Audit procedures to test Cut-off

A

Cut-off procedures, inspect transactions before and after year-end for proper recognition

45
Q

Audit procedures to test Accuracy

A
  • inspection of documentation
  • checking footing and cross footing
  • recalculation of accounts (esp. estimates)
  • reconciliation of supporting docs to general ledger
46
Q

Audit procedures to test existence and occurrence

A
  • Confirmation with 3rd party
  • observation, inspection, examination
  • vouching
47
Q

Audit procedures to test rights and obligations

A

Inspection of documentation

48
Q

Audit procedures to test classification (and understandability)

A
  • Inspection of supporting documents
  • review of related disclosures
  • inquiry of management re: disclosures
49
Q

How to pick the right procedure when there are options

A
  • one that will gather sufficient and appropriate evidence
  • the most efficient option available

Audit (13 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions