Risk, Materiality & Evidence
6 important questions on Risk, Materiality & Evidence
Management assertions = audit objectives about financial statements. Which are they?
- Occurrence
- Completeness
- Accuracy
- Cutoff
- Classification
Accounts
- Existence
- Rights & Obligations
- Completeness
- Valuation & allocation
Presentation and Disclosure
- Occurrence and rights and obligations
- Completeness
- Accuracy and valuation
- Classification and understandability
How does the conceptual model of the audit process look like?
What are the audit procedures to obtain audit evidence?
2. Test of controls: test the effectiveness of the client's internal control activities
3. Substantive procedures: produce evidence about management's assertions related to the amounts and disclosures in a client's financial statements (-> objective to decrease detection risk).
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What are the types of audit procedures?
- Inspection (check existence)
- External Confirmation (check existence and completeness)
- Inspection of documents and records (useful for all assertions, not very reliable)
- Vouching: used to test existence or occurrence assertions
- Tracing: used to test completeness assertion
- Scanning
- Observation (used for test of controls)
- Recalculation and reperformance (e.g. verifying summary totals)
- Analytical procedures (comparison, relationships)
- Client enquiry (useful to obtain information (corroborative))
What is Quality of Audit Evidence?
- Relevance to the assertion
- Independence of the provider
- Extent of auditor's direct knowledge
- Qualifications of the provider
- Level of objectivity
- Reliability and extent of internal processing
There are different fraud categories. Which are they?
- Asset misappropriation (steal)
- Fraudulent Statements (intentional misstatements in the financial statements)
- Corruption (violation of law regulation)
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