Flashcards in Ch 7 - Audit Evidence Deck (59):
any information used by the auditor to determine whether the information being audited is stated in accordance with the established criteria
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
the detailed instruction that explains the audit evidence to be obtained during the audit.
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.
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.
Audit procedures often incorporate which of the following into the procedure?
a) sample size
b) items to select
d) all of the above
d) all of the above
the list of audit procedures for an audit area or an entire audit
What does the audit program always include?
a list of the audit procedures
What three things does the audit program usually include?
1) sample size
2) items to select
3) the timing of the tests
By combining all evidence from the entire audit, the auditor is able to decide when he or she is __________ to issue an audit report
What are two determinants of persuasiveness (both must be met)?
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
Appropriateness can be improved by a larger sample size or by different population items.
Evidence must pertain to or be _____ to the audit objective that the auditor is testing before it can be appropriate.
Refers to the degree to which evidence can be believable or worthy of trust.
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
Sufficiency of evidence is affected by what two things?
1) adequate sample size
2) selection of proper population items
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)
In making decision about evidence for a given audit, both _____and _____ must be considered.
persuasiveness and cost
What are eight types of audit evidence?
1. Physical Examination
4. Analytical procedures
7. Inquiries of the client
Physical examination is the inspection or count of _____ _____.
If the object being examined, such as a sales invoice, has no inherent value, the evidence is called _____.
Receipt of a direct written response from a third party verifying the accuracy of information that was requested by the auditor
When practical and reasonable, US auditing standards require the confirmation of a sample of _____ _____.
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
When auditors use documentation to support recorded transactions or amounts
The use of documentation to determine if transactions or amounts are included in the accounting records
Consist of evaluations of financial information through analysis of plausible relationships among financial and nonfinancial data.
Audit procedures are used extensively in practice, and are required during the _____ & _____ phases on all audits.
planning and completion
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
The obtaining of written or oral information from the client in response to questions from the auditor.
Inquiries of the client
evidence to support the original evidence
Rechecking a sample of calculations made by the client
Independent tests of client accounting procedures or controls that were originally done as a part of an entity’s accounting and internal control system.
Consists of looking at a process or procedure being performed by others.
What are the two most expensive types of evidence?
1. physical examination
What are the three least expensive types of evidence?
2. inquiries of client
a reasonably detailed study of a document or record to determine specific facts about it
a less-detailed examination of a document or record to determine whether there is something unusual warranting further investigation
an examination of written information to determine facts pertinent to the audit (e.g., meeting minutes)
a calculation done by the auditor independent of the client
a calculation done to determine whether a client’s calculation is correct
addition of a column of numbers to determine whether the total is the same as the client’s
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
a comparison of information in two different locations. The instruction should state which information is being compared in as much detail as practical
a determination of assets on hand at a given time
the act of observation should be associated with the type of evidence defined as observation
the act of inquiry should be associated with the type of evidence defined as inquiry
the use of documents to verify recorded transactions or amounts
The record of the audit procedures performed, relevant audit evidence and conclusions the auditor reached. (Often referred to as working papers or work papers).
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
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
Who owns the audit documentation?
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
SEC requires the following documentation
other documents and records
What is the records retention period for non-public companies? public companies?
• five years for non-public companies
• seven years for public companies
contain data of a historical or continuing nature pertinent to the current audit
contain documentation for current year’s audit