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18 Cards in this Set

  • Front
  • Back
Audit documentation should enable the experienced auditor to understand the following
1. Procedures performed under GAAS or other requirements
2. Results and evidence obtained
3. Significant conclusions
4. Accounting records agree with audited info
Examples of more reliable evidence
1. Obtained from knowledgeable independent sources outside the entity
2. Generated under effective internal controls
3. Obtained directly by the auditor
4. It exists in documentary form
5. It consists of original documents (not photocopies)
High level of DR acceptable
o Less Evidence collected
o (N) Less-competent Evidence collected
o (T) Interim testing acceptable
 Opens door for incremental audit risk
 Internal Control should be strong
 Business and transactions should be
relatively stable & predictable
o (E) Fewer transactions are verified
Low level of DR acceptable
o More Evidence collected
o (N) More-competent Evidence collected
o (T) End of year balance testing
o (E) More transactions are verified
Substantive procedures - helps reduce risk of material misstatements
(TRACE)
Trace (Vouch) F/S Data
Reconcile
Analytical Procedures
Confirm (Test of Controls)
Examine
Audit Procedures
1. Balance Sheets (first)
2. Income Statement
Positive Confirmations
Request a reply regardless of whether the respondent agrees with the info stated
Negative Confirmations
Request a response only if they disagree with the info state
Analytical Procedures are required
When:
1. Planning audit
2. Reviewing audit
3. Must be documented
Current Ratio
Current Assets/Current Liabilities
Quick ratio
Liquid Assets/Current Liabilities
Asset Turnover
Net Sales/Average Assets
Inventory Turnover
COGS/Average Inventory
A/R Turnover
Net Credit Sales/Average A/R
Gross Margin %
Gross Margin/Sales
Assertions on Account Balances
(ERCV)
-Existences - Assets, Liabilities,Equity
-Rights & Obligations - holds rights; liabilities are obligations
-Completeness - everything recorded
-Valuation & Allocation - Appropriate amounts & adjustments
Assertions on Transactions & Events
(OCACC)
-Occurence - actually occurred
-Completeness - all events
- Accuracy - recorded appropriately
- Cutoff - correct period
- Classification -proper accounts
Assertions on Presentation & Disclosure
(OCCA)
-Occurrence & Rights/Obligations disclosed transactions
-Completeness - all included
- Classification & Understandability - presented, described, & disclosed
- Accuracy & Valuation - Fairly & correct amounts