Sufficient Appropriate Evidence

Question 1

test data approach

Answer 1

simulated data are processed through a clients accounting system and the actual results are compared with an auditor’s predetermined results

Question 2

audit evidence is normally

Answer 2

persuasive rather than convincing

Question 3

hierarchy of audit evidence

Answer 3

1. observation: generated/obtained directly by auditor
2. confirmations: received directly from outside parties of the entity under audit
3. bank statements: generated externally but received from entity under audit
4. client-generated invoices: generated internally by entity under audit

Question 4

sufficient in q________
appropriate in q_________

Answer 4

quantity; quality

Question 4

underlying elements of the application of GAAS (generally accepted auditing standards)

Answer 4

materiality and audit risk

Question 5

sufficiency and appropriateness affect

Answer 5

persuasiveness

Question 6

appropriateness is determined by its ______ and _____ to F/S

Answer 6

reliability and relevance

Question 7

reliability of audit evidence depends on evidence’s

Answer 7

form, source, nature, and conditions under which it was developed and obtained

Question 8

analytical procedures involve

Answer 8

comparing client data with auditor expectation; used to identify areas that require further investigation (more information is needed to draw a reasonable conclusion)

Question 9

assurance hierarchy (RLAN)

Answer 9

reasonable assurance: highest level of assurance which gives users of financial info confidence to rely on F/S
limited assurance: ensures a low level of accuracy, only inquiries and analytical procedures are performed
absolute assurance: too costly and time consuming to achieve
no assurance: no items are tested

Question 10

uses of confirmations

Answer 10

an effective way to test the existence and valuation assertions
exs.
AR——> customers
investments held—-> custodians, depositories
stock issued and outstanding—-> registrar, transfer agent
bank balances——> banks, financial institutions
AP—–> vendors
long-term liabilities——-> creditors

Question 11

audit evidence that is….(formula)

Answer 11

sufficient + appropriate = reasonable assurance
(enough) + (relevant and reliable) = can rely on

Question 12

if an auditor suspects fraud, the auditor considers

Answer 12

1. integrity of management
2. materiality levels (may need adjustment)
3. implications for other audit areas

fraud is ALWAYS considered material

Question 12

from supporting docs/evidence to accounting records is _____ testing

Answer 12

completeness (tracing)

Question 13

to supporting docs/evidence from accounting records is _____ testing

Answer 13

existence/occurrence (vouching)

Question 14

audit evidence….

Answer 14

-supports the audit opinion
-includes: accounting records that support the financial information AND other information that either confirms or contradicts management assertions
-sufficient
-considers cost-benefit relationship in obtaining evidence
-persuasive rather than conclusive
-relevant
-reliable
-based on professional judgment

Question 15

fixed asset assertions

Answer 15

presentation and disclosure: review disclosures for GAAP compliance/loan agreements, inquire about liens and restrictions
existence or occurrence: inspect/vouch additions, review leases, perform search for unrecorded retirements
rights and obligations: review minutes of board
completeness and cutoff: perform analytical procedures, vouch major entries to repairs/maintenance
valuation, allocation and accuracy: amounts are measure correctly, foot summary schedules, reconcile summary schedules to gains/losses, recalculate depreciation

Question 16

depreciation evidence is corroborated by…. and determined by….

Answer 16

corroborated by:
seller invoices, closing statements, other 3rd party documentation
determined by:
company’s expected use

Question 17

FV measurements and disclosures are assessed by:

Answer 17

1. experience of the personnel involved in the measurements
2. significant assumptions used to develop the estimates
3. relevant market information used to develop the assumptions
4. extent to which management used outside specialists to develop the estimates

Question 18

what are indications of fraud risk under Generally Accepted Government Auditing Standards (GAGAS)

Answer 18

1. conditions threatening the entity’s stability
2. inadequate monitoring of compliance
3. organizational structure is unusally complex
4. unusual trends in contracting or procurement
5. key documentation is lacking