Management Assertions
What are the categories of Management Assertions?
•Classes of Transactions – Revenues and Expenses
•Account Balances – Assets, Liabilities, and Equity Interests
•Presentation and Disclosure – Financial Statements and Notes
What is audit sampling?
The selection and evaluation of less than 100% of the population in order to provide a reasonable basis for conclusions about the population to support our opinion.
What form do we use for testing operating effectiveness of controls?
Controls Sampling Plan (CSP)
What are the assertions for Classes of Transactions?
1 - Occurrence
2 - Completeness
3 - Accuracy
4 - Cutoff
5 - Classification
What is the primary difference between statistical and non-statistical sampling?
The primary difference is that statistical sampling uses statistical techniques to evaluate results, including measuring sampling risk.
P.S. FAD does not use statistical sampling.
How do we test controls?
•Complete Control Sampling Plan (CSP) form.
•Tick marks on the plan.
If you’re auditing the due to other governments line item, which would be a relevant assertion?
A. Existence (EO)
B. Rights and Obligations (RO)
C. Completeness (C)
D. Valuation and Allocation (AV)
What is sampling risk?
The risk that the auditor’s conclusion based on a sample may be different from the conclusion if the entire population were subjected to the same audit procedures.
What line items/transaction cycles we typically perform test of controls?
•Payroll Expenditures
•Non-Payroll Expenditures
•Journal Entries
Which FAD forms are used to documents management assertions?
•Risk Assessment Summary (RAS)
•Control Activity Understanding (CAU)
•Audit Plan (depending on the team)
Provide at least 4 types of selection methods when sampling?
•Systematic
•Block
•Simple random – (TofC)
•Haphazard
•Probability proportionate to size (PPS)
Provide at least 3 reasons why we test controls.
•Test if they are operating effectively.
•Reduce sample sizes for Tests of Details.
•Evidence to rely on analytical procedures.
•Gain evidence to support assessed level of risk.
•Document your evaluation of the audit evidence
What is "RAS - Part II" used for?
It is used to identify, assess, and respond to the risks of material misstatement at the assertion level for financial statement line items determined in the Materiality Misstatement Worksheet (MMW).
What are the types of sampling tests auditors could use?
•Tests of Controls
•Tests of Details
•Dual Purpose (Both)
What is the purpose of CSP? Provide at least 3 reasons.
•Document planned degree of reliance on controls
•Identify specific controls tested
•Document sampling considerations
•Interim / Preliminary Testing (Need to obtain assurance for “bridging period”)