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Chapter 7
Audit Evidence
38
Accounting
Graduate
02/27/2011

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Term
The amount of Audit Evidence is Based on what?
Definition
Appropriateness and cost-feasibility
Term
What must evidence be to be considered persuasive?
Definition
Sufficient and Appropriate
Term
Confirmations
Definition
Received from outside the client company. -Talks to/addresses existence
-For Completeness a search is needed
Term
What factors influence the reliability of evidence?
Definition
1) Independence of provider
2)Effectiveness of Client's Internal control
3)Auditor's direct knowledge
4)Qualifications of individuals providing the information
5)Degree of Objectivity
6)Timeliness
Term
What are the characteristics of a risk driven audit?
Definition
-Items with a high probability of misstatement are audited.
-Balance sheet accounts are audited as close to the balance sheet date as possible
-Income Statement item balances should be over the whole period.
Term
What characteristic could result in a Qualified Opinion
Definition
a lack of evidence
Term
What are the 8 types of Audit Evidence
Definition
-Physical Examination
-Documentation
-Analytical Procedures
-Confirmation
-Inquiries of the Client
-Recalculation
-Reperformance
-Observation
Term
What is the primary determinant of the appropriateness of an internal document
Definition
Internal Control
Term
Vouching
Definition
Using documentation to support transactions and amounts.
-Test for overstatement:
-Ledger to source document
-Tests for existence
Term
Tracing
Definition
Test for Understatement
-Source document to ledger
-tests for completeness
Term
How long does SOX require public companies to keep audit working papers for?
Definition
7 Years
Term
Examine
Definition
(Documentation)
- A reasonably detailed study of a document or record to determine specific facts about it
Term
Scan
Definition
(Analytical Procedure)
- A less detailed examination of a document or record to determine whether there is something unusual warranting further investigation
Term
Read
Definition
(Documentation)
An examination of written information to determine facts pertinent to the audit
Term
Compute
Definition
(Analytical Procedures)
A calculation done by the auditor independent of the client
Term
Recompute
Definition
(Recalculation)
A calculation done to determine whether a client's calculation is correct
Term
Foot
Definition
(Recalculation)
Addition of a column of numbers to determine whether the total is the same as the clients
Term
Trace
Definition
(Documentation or Reperformance)
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 include the term trace will also include a second instruction, such as compare or recalculate.
Term
Compare
Definition
(Documentation)
A comparison of information in two different locations. The instruction should state which information is being compared in as much detail as practical.
Term
Count
Definition
(Physical examination)
A determination of assets on hand at a given time. This term should be associated with the type of evidence defined as physical examination.
Term
Observe
Definition
(Observation)
The act of observation should be associated with the type of evidence defined as observation
Term
Inquire
Definition
(Inquiries of Client)
-The act of inquiry of management about issues related to the audit
Term
Vouch
Definition
(Documentation)
The use of documents to verify recorded transactions or amounts.
Term
Audit Evidence-
Definition
Any information used by the auditor to determine whether the information being audited is stated in accordance with the established criteria.
-Varies in Persuasiveness
Term
What are the four audit evidence decisions that are needed to create an audit program?
Definition
1)Which audit procedures to use
2)What sample size to select for a given procedure
3)Which items to select from the population
4)When to perform the procedures
Term
Sufficiency of evidence
Definition
Determined by the quantity of evidence
Term
What are the components of Persuasive Evidence?
Definition
Sufficiency and Appropriateness
Term
What are the components of Appropriate evidence?
Definition
Relevance and Reliability
Term
Physical Examination
Definition
is the inspection or count by the auditor of a tangible asset
Term
Confirmation
Definition
Describes the receipt of a written or oral response from an independent third party verifying the accuracy of information that was requested by the auditor. Most expensive along with Physical Examination.
Term
Documentation
Definition
is the auditors inspection of the client's documents and records to substantiate the information that is or should be included in the financial statements.
Term
Vouching
Definition
When auditors use documentation to support recorded transactions or amounts.
Term
Analytical Procedures
Definition
Use comparisons and relationships to assess whether account balances or other data appear reasonable compared to the auditor's expectations. They are required during the planning AND completion phases on all audits.
Term
Inquiry
Definition
is the obtaining of written or oral information from the client in response to questions from the auditor.
Term
Recalculation
Definition
involves rechecking a sample of calculations made by the client
Term
Reperformance
Definition
is the auditor's independent test of clients accounting procedures or controls that were originally done as part of the entity's accounting and internal control system
Term
Observation
Definition
is the use of the senses to asses client activities
Term
Internal Control and Evidence
Definition
Internal control has a large effect on the reliability of most evidence.
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