Chapter 10 - Procedures

Question 1

How to design an audit procedure

Answer 1

• identify he types of procedures the auditor can use from ISA 500
• identify the sources of evidence available
• identify the FS assertion to be tested

Question 2

How to write an audit procedure

Answer 2

It should contain an ACTION applied to a SOURCE to achieve an OBJECTIVE

Question 3

Overstatement

Answer 3

Transactions that appear in the FS that should not be included
A transaction that is recorded as an amount higher than it should be

Tests the assertions of accuracy, valuation, existence, rights and obligations and occurrence.

Trace the FS transaction through to the source of the transaction.

Question 4

Understatement

Answer 4

Transactions that should be included but are missing
A transaction is recorded at an amount lower than it should be

Tests the assertions of completeness and accuracy, and valuation

Trace the transaction starting from outside the accounting records through the accounting records and into the FS