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Flashcards in what is an audit Deck (8):

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)


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


Why look at a cycle rather than just individual accounts?

Everything is related and there are no isolated accounts.


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)


What is the revenue cycle?

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


Why use the cycle approach?

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


5 Management Assertions

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


What do "assertions" tell us?

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