Module 17 Audit Process: Evidence Flashcards

1
Q

Once ROMM has been concluded on, the evidence that must be sought in relation to numbers is done through what?

A

Substantive testing, due to the inherent limitations in internal control, the auditor must always perform some substantive procedures.

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2
Q

List the balance assertions

A
  • Existence (E)
  • Completeness (C)
  • Accuracy, valuation and allocation (AVA)
  • Classification(CI)
  • Rights and obligation (R&O)
  • Presentation (P)
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3
Q

List the transaction assertions

A
  • Accuracy (A)
  • Cut-off (CO)
  • Occurrence (O)
  • Completeness
  • Classification (CI)
  • Presentation (P)
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4
Q

Why use assertions?

A

A clearer definition of specific audit objectives - letting auditor focus on key areas

A clearer demonstration of work done - auditor can demonstrate audit has been done to auditing standards and relevant company law

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5
Q

Audit evidence must be sufficient and appropriate, what do they mean?

A

Sufficiency - a measure of the quantity of the evidence

Appropriateness - a measure of the quality of evidence (relevance and reliability)

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6
Q

Appropriate evidence is measured by reliability and relevance - True or false

A

True

Reliability of evidence is affected by the nature (natural/created evidence/rational argument/testimonial evidence) and source (Auditor/Third Party/Client generated)

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7
Q

What is the meaning of sufficient evidence?

A

It is the balance of finding the right amount of evidence required and the cost effectiveness of obtaining the evidence.

Higher ROMM = higher level of evidence

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8
Q

How is sufficiency determined?

A

The level of materiality

Assessed ROMM of the figure being tested

The sources and quality of available evidence

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9
Q

What are the sampling methods auditors use?

A
  • Random selection
  • Monetary unit sampling
  • Haphazard selection
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10
Q

what is sample extrapolation?

A

This is when the auditor projects sample error onto the population as a whole

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11
Q

What are the types of substantive testing approaches?

A

Substantive analytical procedures - testing the total population

Test of details - selecting specific items within the population for testing

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12
Q

What is the difference between tests of controls and substantive procedures?

A

Test of controls is testing something the client has already done during the year and provides evidence that the clients control procedures prevent/detect and correct missatements

Substantive procedures are the procedures that the auditor undertakes to detect possible misstatements that may exist in the financial statements (testing the numbers) at the year end

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13
Q

What does an audit work programme include?

A
  • Client name
  • Client year end date
  • Title of work programme
  • Description of the substantive procedures
  • The assertions met
  • Initials of the audit staff who completed the substantive procedure
  • The date the substantive procedure was completed
  • A work paper reference
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14
Q

What is substantive analytical procedure?

A

When analytical procedures are used to identify a material misstatement at the assertion level

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15
Q

What analytical techniques are commonly used as a substantive procedure?

A

Reasonableness test

Trend analysis

Large and unusual items review

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16
Q

Evidence collection for test of controls?

A
  • Observation
  • Re-preformance
  • Inspection of docs
  • Enquiry
17
Q

Evidence collection for substantive testing

A
  • Confirmation
  • Analytical
  • Recalculation
  • Inspection of assets
  • Inspecation of documents
  • Enquiry