Concepts and Standards - Assertions and Types of Audit Procedures Flashcards
Before applying substantive procedures to the details of asset accounts at an interim date, an auditor should assess
The difficulty in controlling the incremental audit risk.
Why?
professional standards require that an auditor assess the difficulty in controlling the incremental audit risk. In addition, the auditor should consider the cost of the substantive tests that are necessary to appropriately examine the remaining period.
Which of the following documents are examples of audit evidence generated by the client?
Shipping documents and receiving reports are client-generated.
Which of the following is an analytical procedure that an auditor most likely would perform when performing the risk assessment of an audit?
Comparing the current year account balances for conformity with predictable patterns
Why?
analytical procedures performed during risk assessment are ordinarily at a high level and comparing current year balances for conformity with predictable patterns is such a test.
Most likely to be considered a “further audit procedure?”
Performance of tests of controls.
In determining whether transactions have been recorded, the direction of the audit testing should be from the
Original source documents.
Which of the following procedures would a CPA most likely perform in the risk assessment stage of a financial statement audit?
Compare recorded financial information with anticipated results from budgets and forecasts.
Why?
Beacuase it is an analytical procedure often performed during risk assessment of the audit.
The objective of tests of details of transactions performed as substantive procedures is to
Detect material misstatements in the financial statements.
best example of a substantive procedure
Confirmation of balances of accounts receivable.
Note:
Confirmation of balances of accounts receivable will provide a test of the ending account balance and is therefore a detailed test of a balance, a type of substantive procedure.
While substantive procedures may support the accuracy of underlying records, these tests frequently provide no affirmative evidence of segregation of duties because
(This question is stateing that substantive procedure support the accuracy on underlying record however, there is not a confirmation on teh segregation of duties because)
The records may be accurate even though they are maintained by persons having incompatible functions. may not be obtained.
What are some basic procedure used in an audit?
Risk assessment procedures.
Substantive procedures.
Tests of controls.
In the context of an audit of financial statements, substantive procedures are audit procedures that
May be either tests of transactions, direct tests of financial balances, or analytical tests.
Note:
While substantive tests of details are further audit procedures, risk assessment procedures are not.
An auditor may achieve audit objectives related to particular assertions by
Performing analytical procedures.
Which of the following elements ultimately determines the specific auditing procedures that are necessary in the circumstances to afford a reasonable basis for an opinion?
Auditor judgment.
Note:
This answer is correct because the measure of the validity of evidence for audit purposes is based upon the judgment of the auditor. This audit judgment is used to estimate levels of materiality, and relative risk.
The auditor notices significant fluctuations in key elements of the company’s financial statements. If management is unable to provide an acceptable explanation, the auditor should
Perform additional audit procedures to investigate the matter further.
Note:
Auditor should investigate fluctuations that are not expected.
