Chapter 1 - Intro to Assurance and Financial Statement Auditing Flashcards
How does Auditing Differ from Traditional Accounting?
It is much more analytical and logical than traditional accounting
How do Agents and Owners Differ?
Agents (and Managers) are the ones who run the company. They hire the auditors. The owners are the principals or stockholders.
Star - Assertions Auditors Test for on the Income Statement
Occurence
Completeness
Authorization
Accuracy
Cutoff
Classification
Presentation
What is the Occurence Test (I/S)
Want to make sure the transactions occurred as disclosed.
What is the Completeness Test (I/S)
Test that all financial statements are complete
What is the Authorization Test (I/S)
Ensure that all transactions and events are properly authorized.
What is the Accuracy Test (I/S)
Test to make sure amounts and other data related to recorded transactions and events have been recorded appropriately.
What is the Cutoff Test (I/S)
Ensure that the transactions and events have been recorded in the correct period.
What is the Classification Test (I/S)
Ensure that transactions and events have been recorded in the proper accounts.
What is the Presentation Test (I/S)
Make sure everything is presented accurately and understandably.
Star - Assertions Auditors Test For on the Balance Sheet
Existence
Rights and Obligations
Completeness
Accuracy, Valuation, and Allocation
Classification
Presentation
What is the Existence Test (BS)
Assets, liabilities, and equity interests exist
What is the Rights & Obligations Test (BS)
Ensure that the entity holds or controls the rights to its assets, and the liabilities are the obligations of the entity.
What is the Completeness Test (BS)
All assets, liabilities, and equity are recorded, and all related disclosures are included.
What is the test for Accuracy, Valuation, and Allocation (BS)
Assets, liabilities, and equity have been included at appropriate amounts, and any adjustments have been appropriately recorded.
