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18 Cards in this Set
- Front
- Back
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Audit documentation should enable the experienced auditor to understand the following |
1. Procedures performed under GAAS or other requirements
2. Results and evidence obtained 3. Significant conclusions 4. Accounting records agree with audited info |
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Examples of more reliable evidence
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1. Obtained from knowledgeable independent sources outside the entity
2. Generated under effective internal controls 3. Obtained directly by the auditor 4. It exists in documentary form 5. It consists of original documents (not photocopies) |
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High level of DR acceptable
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o Less Evidence collected
o (N) Less-competent Evidence collected o (T) Interim testing acceptable Opens door for incremental audit risk Internal Control should be strong Business and transactions should be relatively stable & predictable o (E) Fewer transactions are verified |
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Low level of DR acceptable
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o More Evidence collected
o (N) More-competent Evidence collected o (T) End of year balance testing o (E) More transactions are verified |
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Substantive procedures - helps reduce risk of material misstatements
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(TRACE)
Trace (Vouch) F/S Data Reconcile Analytical Procedures Confirm (Test of Controls) Examine |
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Audit Procedures
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1. Balance Sheets (first)
2. Income Statement |
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Positive Confirmations
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Request a reply regardless of whether the respondent agrees with the info stated
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Negative Confirmations
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Request a response only if they disagree with the info state
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Analytical Procedures are required
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When:
1. Planning audit 2. Reviewing audit 3. Must be documented |
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Current Ratio
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Current Assets/Current Liabilities
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Quick ratio
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Liquid Assets/Current Liabilities
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Asset Turnover
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Net Sales/Average Assets
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Inventory Turnover
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COGS/Average Inventory
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A/R Turnover
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Net Credit Sales/Average A/R
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Gross Margin %
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Gross Margin/Sales
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Assertions on Account Balances
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(ERCV)
-Existences - Assets, Liabilities,Equity -Rights & Obligations - holds rights; liabilities are obligations -Completeness - everything recorded -Valuation & Allocation - Appropriate amounts & adjustments |
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Assertions on Transactions & Events
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(OCACC)
-Occurence - actually occurred -Completeness - all events - Accuracy - recorded appropriately - Cutoff - correct period - Classification -proper accounts |
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Assertions on Presentation & Disclosure
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(OCCA)
-Occurrence & Rights/Obligations disclosed transactions -Completeness - all included - Classification & Understandability - presented, described, & disclosed - Accuracy & Valuation - Fairly & correct amounts |
