Ch5

Audit documentation should ______.

- support the auditor's conclusions for each material financial statement assertion - demonstrate the underlying accounting records agreed with the financial statements - include an audit program for the engagement

This consists of evaluations of financial information through the examination of plausible relationships among both financial and non-financial data.

Analytical procedures

The audit procedures that will be conducted by the auditor are contained in the

Audit programs

When filling the "assurance bucket", existence or validity is typically more important for accounts_______than for accounts_________

Blank 1: receivable or receivables Blank 2: payable or payables

When audit evidence supports________________ , the auditor can issue an unqualified report.

Blank1: management's, management, manager, manager's, managements, or managers Blank 2: assertions

Who is responsible for the fair presentation of the financial statements?

Management

Substantive procedures

Used to detect material misstatements at the relevant assertion level.

Risk assessment procedures matches

Used to obtain an understanding of the entity and its environment, including its internal control, to assess the risks of material misstatement at the financial statement and relevant assertion levels.

Test of controls

Used to test the operating effectiveness of controls in preventing, or detecting and correcting, material misstatements at the relevant assertion level.

Under current auditing standards, management assertions fall into categories of assertions about ______. - classes of transactions and events and related disclosures for the period audited - account balances and related disclosures at the period end - the internal control in place to prevent errors and fraud - stock performance and market valuations for the period under audit

classes of transactions and events and related disclosures for the period audited account balances and related disclosures at the period end

For lower-risk, well controlled accounts, the assurance bucket may be filled entirely with tests of__________ and substantive analytical procedures

controls

The heading of all audit documentation should include the ______.

entity's year-end date name of the entity title of the working paper

A management statement that the inventory shown on the balance sheet was available for sale at the balance sheet date is an example of the____assertion.

existence

The measure of the quality of audit evidence is referred to as

appropriateness

Specific acts performed by the auditor to gather evidence about whether specific assertions are being met are referred to as____,_____.

audit procedures

The document that outlines the auditor's understanding of the entity and potential risks as well as the strategy to be followed by the auditor is called the

audit plan

The basic framework for the auditor's understanding of audit evidence and its use in supporting the auditor's opinion on the financial statements is (are) ______.

auditing standards

A management statement that the property, plant and equipment shown on the balance sheet was owned and available for sale at the balance sheet date is an example of the ______ assertion.

existence

Documents originating within the entity but circulated to independent sources outside the entity and documents generated outside the entity are referred to as_________documents.

external

True or false: Auditing standards dictate how audit documentation should be organized.

false

Audit documentation is the property of the ______.

independent auditors

he process of________and________-__________provides a trail from the financial statements to the individual audit documents that a reviewer can easily follow.

indexing cross-referencing

Counting cash on hand and examining inventory are examples of_________of tangible assets.

inspection

The reliability of evidence obtained through external confirmations may be affected by the ______.

intended respondent form of the confirmation nature of the information being confirmed prior experience with the entity

There is a(n) ______ relationship between the sufficiency and appropriateness of audit evidence

inverse

Tests of controls ______.

may allow the auditor to gain a degree of assurance over thousands of transactions influence the scope of substantive testing

Confirmations ______.

may provide evidence about the completeness assertion are used extensively on audits provide reliable evidence for the existence assertion

Evidence obtained from a source outside the entity is generally considered ______ evidence obtained solely from within the entity.

more reliable than

The ______ of the audit evidence refers to the form or type of information, which includes accounting records and other available information.

nature

Looking at a process or procedure being performed by others is referred to as______

observation or observing

The ______ assertion relates to whether all recorded transactions and events have happened and pertain to the entity.

occurrence

Because the entity's personnel might have incentives to record fictitious transactions, the_____ assertion is relevant for revenue transactions.

occurrence or validity

Inquiry may ______.

provide corroborative audit evidence be formal or informal provide new audit evidence

The functions of audit documentation are to ______.

provide principal support that the audit was conducted in accordance with GAAS provide the basis for the review of the quality of work aid in the planning, performance and supervision of the audit

In evaluating audit evidence, the auditor must ______. only consider evidence that is 100% reliable remain objective be unbiased understand the types of evidence available

remain objective be unbiased understand the types of evidence available

The independent execution by the auditor of procedures or controls that were originally performed by company personnel is called ______.

reperformance

The audit documentation needs to be organized so that ______ can find the audit evidence that supports each financial statement account.

reviewers any member of the audit team

Analytical procedures can be used by auditors to accomplish ______ procedures.c

risk assessment final analytical substantive analytical

Searching for large and unusual items in the accounting records and reviewing transactions for errors are examples of_____

scanning

Assume an entity has 2,500 customers. If the auditor mails confirmation to 25 of the largest customers and only 20 respond the auditor must ______.

still gather sufficient evidence on each of the 25 accounts

The measure of the quantity of audit evidence is referred to as

sufficiency

Checking the mathematical accuracy of documents or records is referred to as

recalculation

Footing, crossfooting, reconciling subsidiary ledgers and testing postings are all examples of

recalculation

The reliability of inspection of records and documents depends primarily on ______.

whether the document is internal or external

Audit documentation is referred to as____________or the audit file.

working papers

The Sarbanes-Oxley Act and the PCAOB standards require that audit documentation be retained for_______ years from the date of completion of the engagement.

7

Checks, invoices, contracts, ledgers, worksheets and spreadsheets are all part of auditing evidence referred to as

Accounting records

True or false: Auditing standards base the need for substantive procedures for significant account balances on the assessed risk of material misstatement.

False

True or false: Inspecting tangible assets provides significant assurance for the rights and obligations assertion.

False

This is an important audit procedure that is used extensively throughout the audit and is often complementary to performing other audit procedures.

Inquiry

Which of these are generally low-reliability types of evidence because they require further corroboration by the auditor?

Inquiry Observation

Duplicate copies of invoices and shipping remittances are examples of ______ documents.

Internal

This is useful in helping auditors understand the entity's processes but is generally not considered very reliable.

Observation

The auditor's independent execution of procedures or controls that were originally performed by company personnel is referred to as____

Reperformance

The auditor's exercise of professional judgment to review accounting data to identify significant or unusual items to test is referred to as

Scanning

True or false: Although the auditor owns the audit documents, they cannot be shown to outside parties without the entity's consent, except under certain circumstances.

True

True or false: Audit evidence includes information developed by the auditor that permits him or her to reach conclusions through valid reasoning.

True

PCAOB standards require that audit documentation contain ______.

all documents that form the basis of the audit