A3-M6-PROCEDURES TO OBTAIN EVIDENCE

List some of the standard auditing procedures used in most audits (C the FIVE CARROT WARS)

Confirmation

Footing, cross-footing, and recalculation

Inquiry

Vouching

Examination/ Inspection

Cutoff Review

Analytical Procedures

Reperformance

Reconciliation

Observation

Tracing

Walk-through

Auditing related accounts simultaneously

Representation letter

Subsequent events review

What are analytical procedures?

Evaluations of financial information made by a study of plausible relationships among both financial and nonfinancial data (ratio analysis)

Note: AP are required in the PLANNING and FINAL REVIEW phases of the audit. They also may be used (but NOT required) in substantive testing.

What steps are involved when using analytical procedures for substantive testing?

The steps involved when using AP for substantive testing are:

1. Determine that AP are suitable for testing the assertion(s)

2. Evaluate the reliability of data from which the auditor’s expectation is to be developed

3. Develop an expectation of the recorded amount

4. Perform the AP and compare the results of the AP with the expectations

5. Investigate any significant differences

What is the purpose of applying AP during the overall review stage of the audit?

To evaluate the overall F/S presentation, to assess the conclusions reached, and to assist in forming an opinion on whether the F/S are free of MM. This evaluation is typically performed by the manager or partner.

What should the direction of testing be if the auditor is concerned about the existence or occurrence assertion?

Vouching backward from the accounting records (F/S, JE, etc.) to source documents provides evidence of existence or occurrence.

What should the direction of testing be if the auditor is concerned about the completeness assertion?

Tracing forward from source documents to the accounting records (F/S, JEs, etc.) provides evidence of completeness.