Auditing 5

cutoff

Transactions and events have been recorded in the correct accounting period

management makes FS assertions related to

account balances, classes of transactions and events, and presentation and disclosure

Presentation and Disclosure

accounts are described and classified in accordance with GAAP and FS notes are complete, appropriate, and clearly expressed

Inventory turnover and A/R are ____ ratios

activity (leverage is the other kind)

memoranda of the planning process and significant discussions with management are considered ____ working papers

administrative

representations in the representation letter include ____ and ____

all items requiring any disclosure are sufficiently disclosed and FS are complete and were prepared with the use of GAAP

In performing audit procedures, auditors must make sure the procedures cover _______

all material and relevant assertions

valuation, allocation, and accuracy

all transactions, assets, liabilities, and equity interests are included in the FS at proper amounts

workpapers may include:

bank recs, working trial balances, rep letters, and audit plans (NOT FS's)

rights and obligations

company holds rights to the assets, and liabilities are the obligations of the company

documents that substantiate representations contained in the client's financial statements such as audit confirmations, minutes of director's meetings and client representation letter are known as ____ _______

corroborating documents

confirmations are generally effective at providing evidence for the ______ assertion

existence

inspection of tangible assets provide high-quality evidence as to the ____ assertion

existence

risk of material misstatement consists of 2 components

inherent risk and control risk

a spreadsheet that combines petty cash with all the company's bank accounts is an example of a ____

lead schedule or summary schedule

watching a process or procedure being performed by others is the definition of ______

observation

analytical procedures and test of details of account balances, transactions, and disclosures are ______ procedures

substantive

the review of changes in an account balance over time is called _____ ______

trend analysis

the development of common-size FS is also known as ____ ____

vertical analysis

more effective audit procedures are performed by auditors at _____

year-end

completeness

All assets, liabilities, equity interests, and transactions that should have been recorded have been recorded

existence or occurence

Assets, liabilities, and equity interests exist and recorded transactions have occurred

email ordering is an example of

Electronic Data Interchange (EDI)

a primary measure of the effectiveness of an analytical procedure is its ____

precision

used to develop a more precise expectation of a FS balance that is not based on a statistical model, a ____ _____ is similar to regression analysis

reasonableness test (ex: hotel average occupancy rate times average room rates of hotel to find estimated revenues)

In evaluating the appropriateness of audit evidence, auditors consider both its ______ and its ________

relevance, reliability

Comparing the price on an invoice to that on an approved price list is an example of the audit procedure of ______

reperformance

PCAOB requires that auditors emphasize ___ and ____

significant unusual transactions and related party transactions