Ch 7 - Audit Evidence Flashcards Preview

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Flashcards in Ch 7 - Audit Evidence Deck (59):
1

any information used by the auditor to determine whether the information being audited is stated in accordance with the established criteria

Evidence

2

Four Decisions about what evidence to gather and how much of it to accumulate

1. Which audit procedures to use
2. What sample size to select for a given procedure
3. Which items to select from the population
4. When to perform the procedures

3

the detailed instruction that explains the audit evidence to be obtained during the audit.

audit procedure

4

The decision of how many items to test must be made by the auditor for each audit procedure. The sample size is likely to (vary or stay the same) from audit to audit, depending on client characteristics such as the extent of automated controls and the required level of assurance from the procedure.

vary

5

The SEC currently requires that all public companies file audited financial statements with the SEC within _____ days of the company’s fiscal year-end depending on the company’s size.

60-90

6

Audit procedures often incorporate which of the following into the procedure?

a) sample size
b) items to select
c) timing
d) all of the above

d) all of the above

7

the list of audit procedures for an audit area or an entire audit

audit program

8

What does the audit program always include?

a list of the audit procedures

9

What three things does the audit program usually include?

1) sample size
2) items to select
3) the timing of the tests

10

By combining all evidence from the entire audit, the auditor is able to decide when he or she is __________ to issue an audit report

persuaded

11

What are two determinants of persuasiveness (both must be met)?

• appropriateness
• sufficiency

12

A measure of the quality of evidence, meaning its relevance and reliability in meeting audit objectives for classes of transactions, account balances and related disclosures.

Appropriateness of evidence

13

Appropriateness can be improved by a larger sample size or by different population items.

1) True
2) False

2) False

14

Evidence must pertain to or be _____ to the audit objective that the auditor is testing before it can be appropriate.

relevant

15

Refers to the degree to which evidence can be believable or worthy of trust.

reliability

16

What are six characteristics of reliable evidence?

1. Auditor’s direct knowledge
2. Degree of objectivity
3. Effectiveness of client’s internal controls
4. Qualifications of individuals providing the information
5. Independence of provider
6. Timeliness

17

Sufficiency of evidence is affected by what two things?

1) adequate sample size
2) selection of proper population items

18

What are two factors that determine appropriate sample sizes in audits?

1. auditor’s expectations of misstatements
2. the effectiveness of the client’s internal controls (bad internal control → increase sample size)

19

In making decision about evidence for a given audit, both _____and _____ must be considered.

persuasiveness and cost

20

What are eight types of audit evidence?

1. Physical Examination
2. Inspection
3. Confirmation
4. Analytical procedures
5. Recalculation
6. Reperformance
7. Inquiries of the client
8. Observation

(PICARRIO)

21

Physical examination is the inspection or count of _____ _____.

tangible assets

22

If the object being examined, such as a sales invoice, has no inherent value, the evidence is called _____.

documentation

23

Receipt of a direct written response from a third party verifying the accuracy of information that was requested by the auditor

Confirmation

24

When practical and reasonable, US auditing standards require the confirmation of a sample of _____ _____.

accounts receivable

25

The auditor’s examination of the client’s documents and records to substantiate the information that is, or should be, included in the financial statements

inspection

26

When auditors use documentation to support recorded transactions or amounts

vouching

27

The use of documentation to determine if transactions or amounts are included in the accounting records

tracing

28

Consist of evaluations of financial information through analysis of plausible relationships among financial and nonfinancial data.

Analytical procedures

29

Audit procedures are used extensively in practice, and are required during the _____ & _____ phases on all audits.

planning and completion

30

What are four purposes of analytical procedures?

1) understand the client’s industry and business
2) assess the entity’s ability to continue as a going concern
3) indicate the presence of possible misstatements in the financial statements
3) reduce detailed audit tests

31

The obtaining of written or oral information from the client in response to questions from the auditor.

Inquiries of the client

32

evidence to support the original evidence

corroborating evidence

33

Rechecking a sample of calculations made by the client

Recalculation

34

Independent tests of client accounting procedures or controls that were originally done as a part of an entity’s accounting and internal control system.

Reperformance

35

Consists of looking at a process or procedure being performed by others.

Observation

36

What are the two most expensive types of evidence?

1. physical examination
2. confirmation

37

What are the three least expensive types of evidence?

1. observation
2. inquiries of client
3. recalculation

38

a reasonably detailed study of a document or record to determine specific facts about it

examine

39

a less-detailed examination of a document or record to determine whether there is something unusual warranting further investigation

scan

40

an examination of written information to determine facts pertinent to the audit (e.g., meeting minutes)

read

41

a calculation done by the auditor independent of the client

compute

42

a calculation done to determine whether a client’s calculation is correct

recompute

43

addition of a column of numbers to determine whether the total is the same as the client’s

foot

44

an instruction normally associated with inspection or reperformance. The instruction should state what the auditor is tracing and where it is being traced from and to. Often, an audit procedure that includes the term trace will also include a second instruction, such as compare or recalculate

trace

45

a comparison of information in two different locations. The instruction should state which information is being compared in as much detail as practical

compare

46

a determination of assets on hand at a given time

count

47

the act of observation should be associated with the type of evidence defined as observation

observe

48

the act of inquiry should be associated with the type of evidence defined as inquiry

inquire

49

the use of documents to verify recorded transactions or amounts

vouch

50

The record of the audit procedures performed, relevant audit evidence and conclusions the auditor reached. (Often referred to as working papers or work papers).

audit documentation

51

Name four purposes of audit documentation.

1) basis for planning the audit
2) record of the evidence accumulated and the results of the tests
3) data for determining the proper type of audit report
4) basis for review by supervisors and partners

52

What is the overall objective of audit documentation?

to aid the auditor in providing reasonable assurance that an adequate audit was performed in accordance with auditing standards

53

Who owns the audit documentation?

the auditor

54

What does Rule 301 –Code of Professional Conduct state?

a member shall not disclose any confidential information obtained in the course of a professional engagement except with the consent of the client

55

SEC requires the following documentation

working papers
memos
correspondence
communications
other documents and records
electronic records

56

What is the records retention period for non-public companies? public companies?

• five years for non-public companies
• seven years for public companies

57

contain data of a historical or continuing nature pertinent to the current audit

Permanent Files

58

contain documentation for current year’s audit

Current files

59

symbols adjacent to the detail on the body of the schedule

tick mark