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24 Cards in this Set
- Front
- Back
can accounting records alone provide sufficient support for the audit opinion? |
NO |
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auditor's decision regarding the sufficiency of evidence is influenced by: (2 main things) |
RMM: greater risk implies more evidence will be required Quality of Audit Evidence: less audit evidence may be required when that evidence is of higher quality |
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Appropriate Audit Evidence must be both... |
1. Reliable 2. Relevant |
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what does it mean for audit evidence to be relevant? |
must relate to FS assertions under consideration -AR confirmations are relevant to the existence of receivables, NOT their valuation |
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Hierarchy of Audit Evidence |
1. Auditor's direct personal knowledge 2. External evidence 3. Internal evidence 4. Oral evidence |
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Tests of Details are performed... |
on ending balances, details of transactions or a combo of both |
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Tests of Details: if account has high turnover with many transaction during the year, |
auditor concentrates testing on ending balance |
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tests of details of transactions are used when... |
account being substantiated has relatively few transactions during the year |
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define Analytical Procedures |
evaluations of financial info made by a study of plausible relationships among both financial and non-financial data -comparisons of recorded amounts to independent expectations developed by the auditor -must use analytical procedures for planning and overall review in audits |
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documentation requirements when analytical procedures are used as the principal substantive test on a significant FS assertion: |
-auditor's expectation -factors considered in the development of expectation -results of the comparison of the expectation to recorded amounts -addtl audit procedures performed in response to significant unexplained differences -results of such addtl procedures |
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what is Tracing? |
forward from Source Documents to Journal Entries -completeness assertion |
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what is Vouching? |
backward from Journal Entries to Source Documents -existence assertion |
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what is External Confirmation? |
direct WRITTEN response to the auditor from a third party -when online access is provided by management, this is NOT external confirmation |
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what does Auditing Asset Balances and Revenue Transactions test? |
existence because assets are more likely to be overstated |
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9 Financial Statement Assertions |
1. Completeness 2. Existence 3. Occurrence 4. Allocation 5. Presentation 6. Rights 7. Obligations 8. Valuation 9. Disclosure |
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what main procedures support Completeness? |
-tracing -analytical review -observation |
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what main procedures support Valuation? |
-inspection of documentation -footing -independent calculation -reconciliation |
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what main procedures support Existence? |
-confirmation -observation -vouching |
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what main procedure supports Rights/Obligations? |
-inspection |
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what main procedure supports Understandability? |
-inspection -review of disclosures -inquiry of management |
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are IS or BS relationships more predictable? |
IS are more predictable |
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analytical procedures are facilitated if the entity uses... |
a standard cost system that produces variance reports |
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Relevance is affected by |
-whether the audit procedure is designed to directly test an assertion -testing for overstatement/understatement -timing of audit procedures |
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Analytical procedures used in planning the audit should focus on... |
enhancing the auditor's understanding of the client's business |