Audit test 2 wiley acct 3222
Quizzes Exam With Complete Solutions Graded
A+
QUESTIONS AND ANSWERS
Financial Statement Assertions. ANSWER -Claims by management on financial statement
recognition, measurement, presentation, and disclosure of information in the FS
2 categories of assertions:. ANSWER -(used as a guide during risk assessment, what could
go wrong->WCGW)
1) Transactions and Events and Related Disclosures (IS focus) (CPACOP)
2) Account Balances and Related Disclosures (BS focus) (CAREPC)
Completeness (Transactions). ANSWER -All transactions, events, and disclosures recorded
as necessary (did not forget anything)
Proper Period Cutoff (transactions). ANSWER -Recording transactions in the correct
accounting period
Accuracy (Transactions). ANSWER -Appropriate recording of transaction amounts and
related data
Classification (Transactions). ANSWER -Recording transactions in the proper accounts
Occurrence (Transactions). ANSWER -Ensuring recorded events actually occurred and
relate to the entity (claiming no fictitious transactions)
Presentation (Transactions). ANSWER -Grouping transactions appropriately and
providing relevant disclosures in context of GAAP
,Completeness (Account Balances). ANSWER -Recording all assets, liabilities, and equity
interests as required (did not forget anything)
Accuracy, Valuation, and Allocation (Account Balances). ANSWER -Assets, liabilities, and
equity interests valued accurately and adjusted appropriately (subjective)
Rights and Obligations. ANSWER -Entity holds rights to assets, and liabilities are its
obligations
Existence (Account Balances). ANSWER -Assets, liabilities, and equity interests actually
exist (no fictitious items)
Presentation (Account Balances). ANSWER -Appropriate grouping and description of
assets, liabilities, and equity interests according to GAAP
Classification (Account Balances). ANSWER -Assets, liabilities, and equity interests have
been recorded in the proper accounts.
Ch. 3 and 4 Risk Assessment example. ANSWER -1) ID significant accounts and
transactions
2) Relevant assertions :· Example: retailer client has inventory (BS focus) as a significant
account
o Existence is primary assertion
o Accuracy & valuation assertion
Forms of Information. ANSWER -Types of data used as audit evidence:
-Oral info->posing questions to clients and verbal responses are verbal evidence
-Visual info->auditors observe activity (like application of internal controls)
-Paper docs->like sales or lease contracts
-Electronic info->electronic transactions in client's IT system, or some documents only in
electronic form
Characteristics of Audit Evidence:. ANSWER --Sufficient (quantity)
-Appropriate (quality)
, Reliability of evidence by source (from most to least reliable). ANSWER -1) External
evidence->from outside of client, 3rd parties (a. "written confirmation" from customers,
vendors, etc.
2) Auditor observation and knowledge->physical inventory observation
3) Internal evidence->MORE effective if client has STRONG IC, documented evidence is
better than verbal, original docs are better than copies
Conclusion (Audit Evidence). ANSWER -to obtain reasonable assurance, evidence must be
persuasive (sufficient and appropriate) for auditors to draw conclusions
Professional Judgment. ANSWER -Key aspect in evaluating audit evidence and drawing
conclusions
Audit Procedures. ANSWER -(How auditors gather evidence to support Mgt assertions)
...are performed to obtain evidence on which to base the audit opinion.
Audit procedures may be categorized as:. ANSWER --risk assessment procedures (ch.
3,4,6)
-tests of controls (RR procedures)
-substantive procedures (RR phase)
Risk Assessment Procedures (ch. 3,4,6). ANSWER -Understanding entity, internal control,
and risk of misstatement (Through inquiry, inspection, observation, analytical procedures)
Tests of Controls (RR). ANSWER -Evaluating internal control effectiveness in preventing
or detecting material misstatement
Substantive Procedures (RR). ANSWER -Procedures to detect material misstatements
(Tests of details - account balances, transactions, and disclosures Ch 9, 11-15
Analytical procedures Ch 9)
Specific auditing procedures (standard procedures are used in every audit as risk assessment
procedures, tests of controls, and/or substantive tests). ANSWER -FIVE CAROTS
Quizzes Exam With Complete Solutions Graded
A+
QUESTIONS AND ANSWERS
Financial Statement Assertions. ANSWER -Claims by management on financial statement
recognition, measurement, presentation, and disclosure of information in the FS
2 categories of assertions:. ANSWER -(used as a guide during risk assessment, what could
go wrong->WCGW)
1) Transactions and Events and Related Disclosures (IS focus) (CPACOP)
2) Account Balances and Related Disclosures (BS focus) (CAREPC)
Completeness (Transactions). ANSWER -All transactions, events, and disclosures recorded
as necessary (did not forget anything)
Proper Period Cutoff (transactions). ANSWER -Recording transactions in the correct
accounting period
Accuracy (Transactions). ANSWER -Appropriate recording of transaction amounts and
related data
Classification (Transactions). ANSWER -Recording transactions in the proper accounts
Occurrence (Transactions). ANSWER -Ensuring recorded events actually occurred and
relate to the entity (claiming no fictitious transactions)
Presentation (Transactions). ANSWER -Grouping transactions appropriately and
providing relevant disclosures in context of GAAP
,Completeness (Account Balances). ANSWER -Recording all assets, liabilities, and equity
interests as required (did not forget anything)
Accuracy, Valuation, and Allocation (Account Balances). ANSWER -Assets, liabilities, and
equity interests valued accurately and adjusted appropriately (subjective)
Rights and Obligations. ANSWER -Entity holds rights to assets, and liabilities are its
obligations
Existence (Account Balances). ANSWER -Assets, liabilities, and equity interests actually
exist (no fictitious items)
Presentation (Account Balances). ANSWER -Appropriate grouping and description of
assets, liabilities, and equity interests according to GAAP
Classification (Account Balances). ANSWER -Assets, liabilities, and equity interests have
been recorded in the proper accounts.
Ch. 3 and 4 Risk Assessment example. ANSWER -1) ID significant accounts and
transactions
2) Relevant assertions :· Example: retailer client has inventory (BS focus) as a significant
account
o Existence is primary assertion
o Accuracy & valuation assertion
Forms of Information. ANSWER -Types of data used as audit evidence:
-Oral info->posing questions to clients and verbal responses are verbal evidence
-Visual info->auditors observe activity (like application of internal controls)
-Paper docs->like sales or lease contracts
-Electronic info->electronic transactions in client's IT system, or some documents only in
electronic form
Characteristics of Audit Evidence:. ANSWER --Sufficient (quantity)
-Appropriate (quality)
, Reliability of evidence by source (from most to least reliable). ANSWER -1) External
evidence->from outside of client, 3rd parties (a. "written confirmation" from customers,
vendors, etc.
2) Auditor observation and knowledge->physical inventory observation
3) Internal evidence->MORE effective if client has STRONG IC, documented evidence is
better than verbal, original docs are better than copies
Conclusion (Audit Evidence). ANSWER -to obtain reasonable assurance, evidence must be
persuasive (sufficient and appropriate) for auditors to draw conclusions
Professional Judgment. ANSWER -Key aspect in evaluating audit evidence and drawing
conclusions
Audit Procedures. ANSWER -(How auditors gather evidence to support Mgt assertions)
...are performed to obtain evidence on which to base the audit opinion.
Audit procedures may be categorized as:. ANSWER --risk assessment procedures (ch.
3,4,6)
-tests of controls (RR procedures)
-substantive procedures (RR phase)
Risk Assessment Procedures (ch. 3,4,6). ANSWER -Understanding entity, internal control,
and risk of misstatement (Through inquiry, inspection, observation, analytical procedures)
Tests of Controls (RR). ANSWER -Evaluating internal control effectiveness in preventing
or detecting material misstatement
Substantive Procedures (RR). ANSWER -Procedures to detect material misstatements
(Tests of details - account balances, transactions, and disclosures Ch 9, 11-15
Analytical procedures Ch 9)
Specific auditing procedures (standard procedures are used in every audit as risk assessment
procedures, tests of controls, and/or substantive tests). ANSWER -FIVE CAROTS
