Term
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Definition
| any information used by the auditor to determine whether the information being audited is stated in accordance with the established criteria. |
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Term
| What is the "four W's", also known as Audit Evidence Decisions? |
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Definition
Which audit procedures to use?
What sample size to select from the population?
Which items to select from the population?
When to perform the procedures.
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Term
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Definition
| the detailed instruction that explains the audit evidence to be obtained during the audit. |
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Term
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Definition
| the list of audit procedures for an audit area or an entire audit. |
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Term
| Audit program will include the what three items |
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Definition
* Sample sizes
* Items to select
* Timing of the tests
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Term
| What are the two determinants of persuasiveness of evidence |
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Definition
* Appropriateness (right thing)
* Sufficiency (enough)
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Term
| Appropriateness of evidence |
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Definition
| a measure of the quality of evidence, meaning its relevance and reliability in meeting audit objectives for classes of transactions, account balances, and related disclosures. |
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Term
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Definition
| is measured primarily by the sample size the auditor selects. |
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Term
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Definition
| refers to the degree to which evidence can be believable or worthy of trust. |
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Term
| The six characteristics of reliable evidences |
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Definition
* Independence of provider
* Effectiveness of client’s internal controls
* Auditor’s direct knowledge
* Qualifications of individuals providing the information
* Degree of objectivity
* Timeliness
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Term
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Definition
| Evidence obtained from a source outside the entity is more reliable that that obtained form within. |
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Term
| Effectiveness of client’s internal controls |
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Definition
| When a client’s internal controls are effective, evidence obtained is more reliable than when they are weak |
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Term
| Auditor’s direct knowledge |
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Definition
| Evidence obtained directly by the auditor through physical examination, observation, recalculation, and inspection is more reliable than information obtained indirectly. |
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Term
| Qualifications of individuals providing the information |
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Definition
| Although the source of information is independent, the evidence will not be reliable unless the individual providing it is qualified to do so. Therefore, communications form attorneys and bank confirmations are typically more highly regarded than accounts receivable confirmations form persons not familiar with the business world. |
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Term
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Definition
| Objective evidence is more reliable than evidence that requires considerable judgment to determine whether it is correct. Examples of objective evidence include confirmation of accounts receivable and bank balances, the physical count of securities and cash, and adding (footing) a list of accounts payable to determine whether it agrees with balance in the general dodger. |
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Term
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Definition
| The timeliness of audit evidence can refer either to when it is accumulated or to the period covered by the audit. Evidence is usually more reliable for balance sheet accounts when it is obtained as closed to the balance sheet date as possible. |
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Term
| What are the 2 most important factors to determining appropriate sample size |
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Definition
* Auditor’s expectation of misstatements
* Effectiveness of the client’s internal controls
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Term
| Three items that are usually considered more sufficient |
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Definition
* Samples contain population items with large dollar values
* Items with a high likelihood of misstatement
* Items that are representative of the population
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Term
| The persuasiveness of evidence can be evaluated only after considering what? |
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Definition
| the combination of appropriateness and sufficiency, including the effects of the factors influencing appropriateness and sufficiency |
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Term
| what is the auditor's goal? |
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Definition
to obtain a sufficient amount of appropriate evidence at the lowest possible total cost.
(However, cost is never an adequate justification for omitting a necessary procedure or not gathering an adequate sample size) |
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Term
| What are the 8 types of audit evidence? |
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Definition
* Physical examination
* Confirmation
* Documentation
* Analytical procedures
* Inquiries of the client
* Recalculation
* Reperformance
* Observation |
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Term
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Definition
| the inspection or count by the auditor of a tangible asset. |
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Term
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Definition
| describes the receipt of a direct written response from a third party verifying the accuracy of information that was requested by the auditor. |
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Term
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Definition
| the auditor’s inspection of the client’s documents and records to substantiate the information that is, or should be, include in the financial statements |
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Term
| What are the 2 different types of documentation? |
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Definition
* Internal document
* External document |
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Term
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Definition
| has been prepared and used within the client’s organization and is retained without ever going to an outside party |
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Term
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Definition
| has been handled by someone outside the client’s organization who is a party to the transaction being documented, but which are either currently held by the client or readily accessible. |
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Term
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Definition
| use comparisons and relationships to assess whether account balances or other data appear reasonable compared to the auditor’s expectations. |
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Term
| What are the 4 steps of analytical procedures? |
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Definition
* Understand the client’s industry and business
* Assess the entity’s ability to continue as a going concern
* Indicate the presence of possible misstatements in the financial statements.
* Reduce detailed audit tests
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Term
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Definition
| are the obtaining of written or oral information from the client in response to questions from the auditor. |
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Term
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Definition
| involves rechecking a sample of calculation made by the client. |
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Term
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Definition
| is the auditor’s independent tests of client accounting procedures or controls that were originally done as apart of the entity’s accounting and internal control system. (Whereas recalculation involves rechecking a computation, reperformance involves checking other procedures) |
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Term
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Definition
is the use of the senses to assess client activities.
(can only be done in real time) |
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Term
| What are the two most expensive types of evidence? |
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Definition
* physical examination
* confirmation. |
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Term
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Definition
a reasonably detailed study of a document or record to determine specific facts about it.
Example:Examine a sample of vendors’ invoices to determine whether the goods or services received are reasonable and of the type normally used by the client’s business. |
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Term
| Type of evidence used to examine |
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Definition
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Term
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Definition
a less-detailed examination of a document or record to determine whether there is something unusual warranting further investigation.
Example:Scan the sales journal, looking for large and unusual transactions. |
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Term
| Type of evidences used to scan |
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Definition
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Term
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Definition
an examination of written information to determine facts pertinent to the audit.
Example:Read the minutes of a board of directors meeting and summarize all information that is pertinent to the financial statements in an audit file. |
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Term
| What type of evidence is to read? |
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Definition
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Term
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Definition
a calculation done by the auditor independent of the client
Example:Compute inventory turnover ratios and compare with those of previous years as a test of inventory obsolescence. |
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Term
| What type of evidence is used to compute? |
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Definition
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Term
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Definition
a calculation done to determine whether a client’s calculation is correct.
Example:Recomputed the unit sales price times the number of units for a sample of duplicate sales invoices and compare the total s with the calculations. |
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Term
| What type of evidence is used to recompute? |
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Definition
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Term
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Definition
addition of a column of numbers to determine whether the total is the same as the client’s
Example:Foot the sales journal for a 1-month period and compare all totals with the general ledger. |
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Term
| What type of evidence is used to foot? |
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Definition
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Term
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Definition
an instruction normally associated with documentation or reperformance. The instruction should state what the auditor is tracing and where it is being traced from and to. Often, an audit procedure that includes the term trace will also include a second instruction, such as compare or recalculate.
Example:Trace a sample of sales transactions from sales invoices to the sales journal, and compare customer name, date, and the total dollar value of the sale. Trace postings from the sales journal to the general ledger accounts.
*moves forward through the transaction process*
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Term
| What type of evidence is used to trace? |
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Definition
* Documentation
* Reperformance
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Term
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Definition
a comparison of information in two different locations. The instruction should state which information is being compared in as much detail as practical.
Example:Select a sample of sales invoices and compare the unit selling price as stated on the invoice to the list of unit selling prices authorized by management. |
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Term
| What type of evidence is used to compare? |
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Definition
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Term
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Definition
a determination of asset on hand at a given time. This term should be associated only with the type of evidence defined as physical examination.
Example:Count a sample of 100 inventory items and compare quantity and description to client’s counts. |
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Term
| What type of evidence is used to count? |
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Definition
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Term
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Definition
the act of observation should be associated with the type of evidence defined as observation.
Example:Observe whether the two inventory count teams independently count and record inventory counts. |
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Term
| What type of evidence is used to observe? |
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Definition
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Term
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Definition
the act of inquiry should be associated with the type of evidence defined as inquiry.
Example:Inquire of management whether there is any obsolete inventory on hand at the balance sheet date. |
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Term
| What type of evidences is used to inquire? |
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Definition
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Term
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Definition
the use of documents to verify recorded transactions or amounts.
Example: Vouch a sample of recorded acquisition transactions to vendors’ invoices and receiving reports.
*moves backwards through the transaction process*
*can move in both directions*
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Term
| What type of evidence is used to vouch? |
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Definition
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Term
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Definition
| is the principal record of auditing procedures applied, evidence obtained, and conclusions reached by the auditor in the engagement. |
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Term
| Audit documentation needs to provide what 4 things? |
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Definition
* A basis for planning the audit
* A record of the evidence accumulated and the results of the tests
* Data for determining the proper type of audit report
* A basis for review by supervisors and partners.
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Term
| What is the overall objective of audit documation? |
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Definition
| to aid the auditor in providing reasonable assurance that an adequate audit was conducted in accordance with auditing standards. |
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Term
| Whose property is the audit documentation? |
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Definition
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Term
| Length of time that audit records need to be retained |
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Definition
* 5 years for a private company
* Not less than 7 years for a public company
* However, they could be kept forever.
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Term
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Definition
| contain data of a historical or continuing nature pertinent to the current audit. These files provide a convenient source of information about the audit that is of continuing interest from year to year. |
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Term
| What is included in permanent files? |
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Definition
| * Extracts or copies of such company documents of continuing importance as the articles of incorporation, bylaws, bond indentures, and contracts. * Analyses from previous years of accounts that have continuing importance to the auditor. * Information related to understanding internal control and assessing control risk. * The results of analytical procedures from previous years’ audits. |
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Term
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Definition
| include all audit documentation applicable to the year under audit. |
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Term
| What type of information is included in the permanent and current files? |
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Definition
* Audit programs
* General information
* Working trial balance
* Adjusting and reclassification entries
* Supporting schedules
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Term
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Definition
| symbols adjacent to the detail on the body of the schedule. These notations must be clearly explained at the bottom of the schedule. |
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