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Chapter 4 & 5
Preliminary Surveys and Audit Programs
22
Accounting
Undergraduate 3
10/25/2013

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Cards

Term
What are some things Auditors should put on their reminder list?
Definition
- Review of prior years workpapers
- Analytical Review (like performed in case from casebook)
- Checklist to make sure all work is performed
- Requires sign off and date to make sure work is completed and documented – DO NOT Quick Tick!
Term
What are some Audit Evidence Decisions to consider?
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 (timing)
Term
What is included in the Audit Program?
Definition
It includes a list of the audit procedures the auditor considers necessary.
- Sample sizes
- Items to select
- Timing of the tests
Most auditors use computers to facilitate the preparation of audit programs.
Term
What are two determinants of Persuasive Evidence
Definition
Appropriateness and Sufficiency
Term
What are the Six Characteristics of Reliable Evidence?
Definition
1. Independence of provider
2. Effectiveness of client’s internal controls
3. Auditor’s direct knowledge
4. Qualification of individuals providing the information
5. Degree of objectivity
6. Timeliness
Term
Persuasiveness and Cost
Definition
In making decisions about evidence
for a given audit, both persuasiveness
and cost must be considered. The auditor’s goal is to obtain a
sufficient amount of appropriate
evidence at the lowest total cost.
Term
What are some types of Audit Evidence?
Definition
Types of Audit Evidence
Term
What is Physical Examination?
Definition
It is the inspection or count by the
auditor of a tangible asset. This type of evidence is most often associated with inventory and cash.
Term
What are some ways of confirmation for these:
Assets:
Cash in bank
Accounts receivable
Notes receivable
Owned inventory out on consignment
Inventory held in public warehouses
Cash surrender value of life insurance

Liabilities:
Accounts payable
Notes payable
Advances from customers
Mortgages payable
Bonds payable

Owner's Equity:
Shares outstanding

Other Information:
Insurance coverage
Contingent liabilities

Bond indenture agreements
Collateral held by creditors
Definition
Bank
Customer
Maker
Consignee
Public warehouse
Insurance company

Creditor
Lender
Customer
Mortgagor
Bondholder

Registrar and transfer agent

Insurance company
Bank, lender, and client’s legal counsel
Bond holder
Creditor
Term
What is documentation?
Definition
It is the auditor’s inspection of the
businesses documents and records. Both internal and external.
Term
What are some analytic procedures?
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
Term
What are inquiries of the person?
Definition
It is the obtaining of written or oral information from the client in response to questions from the auditor.
Term
What is a recalculation?
Definition
It involves rechecking a sample of calculations made by the client.
Term
What is Reperformance?
Definition
It is the auditor’s independent tests of client accounting procedures or controls that were originally done.
Term
What is Observation?
Definition
It is the use of the senses to assess client activities. The auditor may tour the plant to obtain a general
impression of the client’s facilities.
Term
What are some Appropriateness of Types of Evidence
Definition
- Type of evidence
- Independence of provider
- Effectiveness of client’s internal controls
- Auditor’s direct knowledge
- Qualifications of provider
- Objectivity of evidence
Term
What is the Audit Documentation?
Definition
Audit documentation is the principal record of auditing procedures applied, evidence obtained, and conclusions reached by
the auditor in the audit.
Term
What does the Sarbanes-Oxley Act do?
Definition
The Sarbanes-Oxley Act requires auditors of public companies to prepare and maintain audit working papers for a period of no
less than seven years.
Term
What are Permanent Files?
Definition
These files are intended to contain
data of a historical or continuing
nature pertinent to the current audit.
Term
What are some examples of current files?
Definition
- Summary of procedures
- Examination of supporting documents
- Informational
- Outside documentation
Term
What must be done in Preparation of Audit Documentation?
Definition
- Each audit file should be properly identified
- Documentation should be indexed and cross-referenced
- Completed documentation must clearly indicate the audit work performed
- It should include sufficient information
- It should plainly state the conclusions reached
Term
What are some of the effects of E-commerce
Definition
- Audit evidence is increasingly in electronic form
- Auditors must evaluate how electronic information affects their ability to gather evidence
- Auditors use computers to read and examine evidence
- Software programs are typically Windows-based
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