Auditing Ch 7 Audit Evidence

Front 1

Acceptable Audit Risk

Back 1

measure of how willing the auditor is to accept that the FS may be materially misstated after the audit is completed and an unqualified opinion has been issued.

Front 2

Audit Strategy

Back 2

overall approach to the audit that considers the nature of the client, risk of significant misstatements, and other factors such as the number of client locations and past effectiveness of client controls

Front 3

Budgets

Back 3

written records of client's expectations for period; a comparison of budgets vs actuals may indicate whether on not misstatements are likely

Front 4

Bylaws

Back 4

rules and procedures adopted by a copr's stockholders, including the corp's fiscal year and duties and powers of officers

Front 5

Client Business Risk

Back 5

risk that the client will fail to achieve it's objectives related to:
1. reliability of financial reporting
2. effectiveness and efficiency of operations
3. compliance w/ laws and regulations

Front 6

Corporate Charter

Back 6

-legal document granted by the state in which a co is inc that recognizes a corp as a separate entity
-includes the name of corp, date of inc., capital stock of corp is authorized to use, types of buisness activities corp is authorized to conduct

Front 7

Corporate minutes

Back 7

official record of meetings of a corp's BOD and SH, in which corp issues, like declarations of dividends and approval of contracts, are documented

Front 8

Engagement Letter

Back 8

an agreement between CPA firm and client as to the terms of the engagement for the conduct of the audit and related services

Front 9

Inherent Risk

Back 9

measure of auditor's assessment of likelihood that there are MMS in a segment before considering the effectiveness of IC

Front 10

Initial Audit Planning

Back 10

involves deciding whether to accept or continue doing audit for client, ID client's reasons for audit, obtaining engagement letter and developing audit strategy

Front 11

Related Party

Back 11

affiliated co, principal owner of the client co, or any other party with which the client deals, where one of the parties can influence the mgmt or operating policies of the other

Front 12

Related Party Transaction

Back 12

any transaction between the cliend and a related party

Front 13

Audit Procedure

Back 13

detailed instruction that explains audit evidence to be obtained during audit

Front 14

Persuasiveness of Evidence (2 determinants)

Back 14

1. appropriateness
2. sufficiency

Front 15

Appropriateness of Evidence

Back 15

measure of quality of evidence, meaning it's relevance and reliability in meeting audit objectives for classes of tranx, acct balances and related disclosures

Front 16

Relevance of Evidence

Back 16

evidence must pertain or be relevant to audit objectives

Front 17

Reliability of Evidence (six characteristics)

Back 17

1. independence of provider (3rd parties)
2. effectiveness of client's IC
3. auditor's direct knowledge
4. qualifications of individuals providing info
5. degree of objectivity
6. timeliness

Front 18

Sufficiency of Evidence

Back 18

measured primarily by sample size selected by auditor
-auditor's expectations and effectiveness of IC are two biggest factors in selecting sample size

Front 19

Types of Audit Evidence (8)

Back 19

1. physical examination
2. confirmation (written from 3rd party)
3. documentation
4. analytical procedures
5. inquiries of client
6. recalculation
7. reperformance
8. observation

Front 20

Two most expensive types of evidence

Back 20

1. physical exam
2. confirmation

Front 21

Three moderately expensive types of evidence

Back 21

1. documentation
2. analytical procedures
3. reperformance

Front 22

Three least expensive types of evidence

Back 22

1. observation
2. inquiries
3. recalculation

Front 23

Audit Documentation

Back 23

principal record of auditing procedures applied, evidence obtained, and conclusions reached by auditor in the engagement

Front 24

Ownership and confidentiality of audit files

Back 24

1. during engagement, property of auditor, then kept on file at firm
2. must be kept confidential

Front 25

Supporting Schedules

Back 25

-largest part of documentation
-prepared by client
-support specific amts on FS

Front 26

Major types of supporting schedules (7)

Back 26

1. analysis shows activity in GL
2. trial balance details makeup of YE balance
3. reconcilations support specific amt
4. tests of reasonableness
5. summary of procedures summarizes results of specific audit procedure
6. examination of supporting documents shows detailed tests performed
7. informational