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Flashcards in what is an audit Deck (8):
1

What does an audit produce?

- audit report
- an opinion on the financial statements compliance with a comprehensive set of accounting standards (GAAP, IFRS, Statutory accounting like ins companies, public schools, cities, etc)

2

How does an auditor produce the audit report?

- report expresses an opinion
- gives: reasonable assurance, free of material misstatement, examining evidence that supports account balances and disclosures on a test basis, and a similar process for internal controls

3

Why look at a cycle rather than just individual accounts?

Everything is related and there are no isolated accounts.

4

What is the cycle approach?

Acknowledges that each account is related and does not exist in isolation. (ex: increase in sales is directly related to increase in A/R)

5

What is the revenue cycle?

Order acceptance, shipping, billing, cash collections. Exclude production and product cost from the revenue cycle.

6

Why use the cycle approach?

The cycle approach enables the auditor to gather audit evidence on a number of accounts at the same time.

7

5 Management Assertions

VERPC (evaluates veracity)
- Valuation
- Existence
- Rights & obligations
- Presentation/disclosure
- Completeness

8

What do "assertions" tell us?

- Account balances are not facts
- auditor must break accounts and transactions into smaller pieces to consider all effects