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Flashcards in Audit Evidence 3 Deck (21):

Tracing old equipment recorded in the books to the actual equipment during a plant tour is a control which tests fro unrecorded retirement.

Selecting items from the plant tour and then tracing them to the equipment subsidiary ledger will provide evidence that all equipment is recorded.


The auditor should select cash disbursements made subsequent to year-end and examine the supporting document ( i.e receiving report, vendor invoice).

The auditor looks for items that should have been recorded at the balance sheet date, but were not.


Voucher payable department usually do
1. Matching the receiving report with the purchase order
2.having an authorized person approve the voucher
3. determine the mathematical accuracy of the vendor's invoice

Which mean the voucher payable department responsible for approve the voucher for payment and matching the receiving report, purchase order and vendor's invoice

Internal control is enhanced if check mailing is performed by the treasury (cash disbursement) department.

Mailing disbursement checks and remittance advices should be controlled by the employee who sign the check lasts.


Tracing from the inventory listing to the inventory tags and the auditor's recorded count sheet verifites

the validity ( existence ) of the item.


Negative assurance may be used to confirm AR when

1. the combined assessed level of inherent and control risk is low
2. a large number of small account balances are being confirmed
3.there is no reason to expect that receipt of the request will ignore them


The auditor has four responsibilities with respect to evaluating estimates

1. to assess management's practices
2. to verify that all material misstatement have been developed
3. to determine that accounting estimate are reasonable
4. to ensure the accounting estimate are properly recorded and disclosed.


In evaluate the reasonableness of estimates, the auditor focuses on assumption that

1. are significant to estimate
2. sensitive to variation
3.deviation from historical pattern
4. subjective and susceptible to misstatement or bias


1. expected misstatement
2. standard deviation (popular variability)
3. assessed level of risk

1. Tolerable misstatement
2. Acceptable level of risk


sample deviation rate + allowance for sampling risk

= upper deviation rate


To determine the number of items to be selected fro a particular sample for a test of controls,

the auditor should consider the
1. tolerable deviation rate
2. the expected deviation rate
3. the allowable risk of assessing control risk too low


In tests of controls, population size has virtually no effect on sample size unless the population is small.

unless the population is small.


Attribute sampling examine the rate of occurrence in a sample, the attribute either exists or does not exist, therefore, attribute sampling is more useful for test of control, such as examination of time cards for proper approval or identifying entries posted to incorrect accounts.

Variable sampling is used in substantive testing, not in tests of control.


The assessment of control risk relates to tests of control

not to tests of detail ( substantive testing)


Advantage of PPS sampling
1. PPS automatically emphasizes LARGER items by stratifying the sample. the chance of an item being selected is proportionate to its dollar amount
2. if no error are expected, PPS sampling generally requires a smaller sample than other method.

Disadvantage of PPS sampling

Zero balance, negative balance, and understated balances generally requires special design considerations.


When planning a particular sample for a substantive test of details, the auditor should consider

1. the relationship of the sample to the relevant audit objectives
2. preliminary estimates of material levels.
3. the auditor's allowable risk of incorrect acceptance
4. characteristics of the population


首先判断问题是关于INTERNAL CONTROL 还是关于 ACCOUNT BALANCE (substantive tests of detail)

1. 如果是关于internal control, 则是 ASSESSING CONTROL RISK TOO HIGH OR TOO LOW.
2. 如果关于account balance, 则是 INCORRECT REJECTION OR ACCEPTANCE.


Stratification is commonly used when

a population has HIGHLY VARIABLE recorded amount.


In nonstatistical sampling, the SAMPLE SIZE is NOT determined mathematically.

auditor use their judgement in determine sample size, and sample results are evaluated judgmentally.


Recorded amount - audit amount = 污染率 % X sample interval = projected error

if recorded amount is larger than the sample interval, use the actual difference ( recorded amount - audit amount).


Nonsampling risk include all aspects of audit risk that are NOT due to sampling.

example are
1. auditor selecting inappropriate auditing procedures
2. using inappropriate audit evidence
3. failure by the auditor to recognize misstatement in documents examined.


Sampling risk arise from the possibility that, when a substantive test is restricted to a sample

conclusion might be different than if the auditor had tested each item in the population.