AUDTHEO: Audit Process and Evidence-Gathering Procedures

Acts to be performed in order to obtain audit evidence.

Audit Procedures

Audit procedures performed to obtain an understanding of the entity and its environment, including its internal control, and to assess the risks of material misstatements at the financial statement and assertion levels.

Risk assessment procedures

Audit procedures to test the operating effectiveness of controls in preventing or detecting and correcting material misstatements at the assertion level.

Test of Control

Audit procedures to detect material misstatements at the assertion level.

Substantive procedures

An auditor may achieve audit objectives related to particular assertions by:

Performing analytical procedures

Examining records or documents, whether internal or external, in paper form, electronic form, or other media.

Inspection of records or documents

Physical examination of the assets.

Inspection of tangible assets

Consists of looking at a process or procedures being performed by others.

Observation

Consists of seeking information from knowledgeable persons, both financial and nonfinancial, within the entity or outside the entity.

Inquiry

The process of obtaining a representation of information or of an existing condition directly from third party. It is a specific type of inquiry.

Confirmation

Consists of checking the mathematical accuracy of documents or records.

Recalculation

Auditor’s independent execution of procedures or controls that were originally performed as part of the entity’s internal control.

Reperformance

Evaluation of financial information made by study of plausible relationships among both financial and non-financial data.

Analytical procedures

The best explanation of the difference between audit objectives and audit procedures.

Audit objectives define specific desired accomplishments; audit procedures provide the means of achieving audit objectives.

Management assertions are:

Implied or express representations about the accounts in the financial statements

Management assertions are:

Directly related to GAAP

Assertions used by the auditor fall into the following categories:

* Assertions about presentation and disclosure
* Assertions about account balances at period end
* Assertions about classes of transactions and events

Assertions about account balances at the period-end include valuation and allocation, which means that

Assets, liabilities and equity interests are included in the financial statements at appropriate amounts and any resulting valuation or allocation adjustments are appropriately recorded.

The assertion of cut-off means that:

Transactions and events have been recorded in the correct accounting period

The assertions of occurrence means that:

Transactions and events that have been recorded have occurred, and pertain to the entity

Description that refers to the completeness assertion:

All disclosures that should have been included in the financial statements have been included.

Confirming proper title to equipment supports which kind assertions?

Rights and obligations

The auditor notices that a client’s cash-basis financial statements are prepared with accrual basis financial titles. This situation bears on which financial statement assertion?

Presentation and disclosure

The process of vouching helps establish that all recorded transactions are

Valid

Physical examination of tangible assets is **NOT** a sufficient form of evidence when the auditor wants to determine the:

Ownership of the asset

Which audit procedures is used extensively throughout the audit but does **NOT**, by itself, provide sufficient appropriate evidence?

Inquiry

Evidence obtained directly by the auditor is more reliable than information obtained indirectly. Evidence can be obtained directly by:

* Inspection
* Observation
* Computation

In testing for lower-of-cost-or-net realizable value, the auditor is gathering evidence to support _____ assertions?

Valuation