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
