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Management's Responsibilities
Auditor's Responsibilities
Management Assertions
Persuasiveness of Evidence
Types of Audit Evidence
100
It is the responsibility of _____________ to adopt sound accounting policies, prepare the financial statements and maintain a system of internal controls
What is Management?
100
The overall objective of the auditor, in conducting an audit of financial statements, are to obtain _____________ assurance about whether the financial statements as a whole are free from _____________ misstatement, whether due to error or fraud
What are reasonable and material
100
____________ are implied or expressed representations by management about classes of transactions and the related accounts and disclosures in the financial statements.
What are management assertions
100
The two determinants of the persuasiveness of evidence are:
What are: 1) appropriateness and 2) sufficiency
100
In deciding which audit procedures to use, the auditor can choose from eight broad categories of evidence, which are called ________ of evidence
What are types
200
These two officers are required to certify quarterly and annual financial statements submitted to the SEC
Who are the CEO and CFO
200
Auditing standards indicate reasonable assurance is a ________ , but not absolute, level of assurance that the financial statements are free of material misstatements.
What is high
200
this assertion addresses whether all transactions that should be included in the financial statements are in fact included.
What is completion
200
Appropriateness of evidence is a measure of the _________ of evidence whereas sufficiency is a measure of the ________ of evidence.
What are: 1) quality and 2) quanity
200
This type of evidence relates to the inspection or count by the auditor of a tangible asset such as inventory and cash
What is physical examination
300
The name of this legislation provides criminal penalties for anyone who knowingly falsely certifies financial statements, possibly resulting in prison time
What is the Sarbanes-Oxley Act?
300
The auditor is responsible for reasonable, but not absolute, assurance for several reasons, including:
What are: 1) sampling 2) complex accounting estimates 3) fraud difficult to detect
300
This assertion concerns whether recorded transactions included in the financial statements actually occurred during the accounting period.
What is occurrence
300
The two components of appropriateness of evidence are:
What are: 1) relevance of evidence and 2) reliability of evidence
300
This type of audit evidence involves the auditor's examination of the client's documents and records to substantiate the information that is or should be included in the financial statements.
What is inspection
400
In signing the quarterly and annual financial statements submitted to the SEC, management certifies that the financial statements fully comply with the requirements of this legislation
What is Securities Exchange Act of 1934
400
Auditing standards require that an audit be designed to provide reasonable assurance of detecting both material errors and fraud in the financial statements. To accomplish this, the audit must be planned and performed with an attitude of ___________ in all aspects of the engagement
What is professional skepticism
400
This assertion deals with whether assets, liabilities, and equity interests included in the balance sheet date actually existed on the balance sheet date
What is existence
400
This refers to the degree to which evidence can be believable or worthy of trust.
What is reliability of evidence
400
This term refers to the use of documents to verify recorded transactions or amounts, i.e., going from the ledger or journal to source documents
What is vouching
500
If management insists on financial statement disclosure that the auditor finds unacceptable, the auditor can issue an _________ opinion or a _____________ opinion
What are adverse and qualified
500
Professional skepticism consists of two primary components:
What are: 1) a questioning mind (trust but verify) and 2) critical assessment of the audit evidence
500
International auditing standards and AICPA auditing standards classify assertions into three categories:
What are: 1) classes of transactions 2) account balances at a period end 3) presentation and disclosure
500
This is one of the six characteristics of reliable evidence that deals with evidence obtained directly by the auditor through physical examination, observation, recalculation, and inspection.
What is auditor's direct knowledge
500
Analytical procedures consist of evaluations of financial information through analysis of plausible relationships among financial and non-financial data. The four purposes of analytical procedures include:
What are: 1) understand the client's industry and business 2) assess the entity's ability to continue as a going concern 3) indicate the presence of possible misstatement in the financial statements and 4) reduce detailed audit tests