Documentation, evidence, and sampling Flashcards Preview

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Flashcards in Documentation, evidence, and sampling Deck (15):
1

What is the purpose of audit documentation?

To support conclusions, provide and overall understanding, and to provide evidence of compliance. They provide a record of planning and performance, supervision and review, and evidence obtained.

2

Describe the form and content of working papers

Audit documentation must be sufficient to allow another auditor to understand the work, evidence, matters, and conclusions.

3

Describe the two types of audit file

Permanent file: permanent matters, updated at the start of each annual audit.
Current file: relate to the set of accounts being audited, prepared on each audit.

4

Retention of working papers

Confidential, secure location, ICAEW requires document retention policy, should be kept for SIX YEARS from the end of the accounting period.

5

Ownership of working papers

Belong to auditor, can be shown to client, third party with permission, any reports belong to client.

6

Describe the general procedures for obtaining evidence

Substantive procedures, CAATs, analytical procedures, directional testing, and accounting estimates.

7

Substantive procedures

Reperformance
Observation
Analytical procedures
Recalculation
Confirmation
Inquiry
Inspection of assets/documents

8

What are the two types of CAATs?

Test data and audit software

9

How can data analytics be used?

Transaction analysis, judgemental analysis, and analytical procedures.

10

Directional testing

Overstatement: start with the accounts, trace to supporting evidence.
Understatement: Start with the reciprocal population, trace back to figure in the accounts.

11

Audit procedures for accounting estimates

Review and test, use an independent expert, review subsequent events, and test operating effectiveness.

12

Describe the sampling process

Identify population, identify sampling unit, select sample, identify errors, draw conclusions.

13

Sampling methods

Statistical: random, systematic, money unit sampling.
Non-statistical: haphazard, sequence.

14

What to consider when identifying errors and drawing conclusions?

Nature of errors, cause of errors, impact, probable misstatement.

15

Evaluation of misstatements

The auditor must communicate all misstatements to management and request they correct them. If they decline > modified audit opinion.