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What are the 15 methods of obtaining audit evidence?
- C -- F-I-V-E -- C-A-R-R-O-T -- W-A-R-S
- Confirmation
- Footing, Crossfooting, and Recalculation
- Inquiry
- Vouching
- Examination/Inspection
- Cutoff Review
- Analytical Procedures
- Reperformance
- Reconciliation
- Observation
- Tracing
- Walk-through
- Audit of Accounts, Simultaneous
- Representation Letter
- Subsequent Events Review
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Explain the confirmation audit procedure to obtain audit evidence. What assertions does this substantiate.
- Obtaining representations from independent external 3rd parties about account balances, transactions, or events.
- Substantiates existence.
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Explain the footing, cross-footing, and recalculation audit procedure to obtain audit evidence.
When the auditor verifies the mathematical accuracy of statements and schedules by adding down (footing), adding across (cross-footing), or recalculating amounts.
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Explain the inquiry audit procedure to obtain audit evidence.
Requesting information from knowledgeable parties both internally and externally.
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Explain the vouching audit procedure to obtain audit evidence. What assertions does this substantiate?
- Directional testing going from the FS back to the supporting documents.
- Substantiates existence or occurrence (e.g., identify overstatement errors)
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Explain the examination or inspection audit procedure to obtain audit evidence. What assertions does this substantiate?
- The review of records, documents, or tangible assets, in either physical, paper, or electronic form.
- Provides existence evidence.
- It does not typically provide evidence for ownership, rights, obligations, or valuation.
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Explain the cutoff review audit procedure to obtain audit evidence. What accounts are particularly vulnerable?
- Reviewing purchases and payments at the end of the period are accrued in the correct period.
- Accounts to pay particularly close attention include inventory, cash, purchases, sales, accruals
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Explain the analytical procedures audit procedure to obtain audit evidence. What makes an analytical procedure substantive? A study of meaningful relationships or comparisons among data, to highlight unusual fluctuations.
If analytical procedures are compared to an auditor-developed expectation, the procedure is substantive
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What is scanning?
Scanning is included when searching for large, significant, or unusual items in the accounting records.
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Explain the reperformance audit procedure to obtain audit evidence.
The auditor independently performs procedures or controls that were originally performed as part of the entity's internal control.
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Explain the reconciliation audit procedure to obtain audit evidence. What assertions does this substantiate?
- Comparing financial amounts from two independent sources for agreement (e.g., physical inventory count vs perpetual inventory records; cash balance vs bank balance)
- Substantiates existence and valuation
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Explain the observation audit procedure to obtain audit evidence.
When the auditor watches the performance of a process or procedures performed by others.
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Explain the tracing audit procedure to obtain audit evidence. What assertions does this substantiate?
- Directional testing going from the source documents forward to the FS.
- Substantiates completeness (e.g., identify understatement errors)
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Explain the walk-through audit procedure to obtain audit evidence.
Inquiring and observation of an entity's personnel about their understanding and performance of what is required by the entity's prescribed procedures and controls at the points at which important processing procedures occur.
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Explain the representation letter audit procedure to obtain audit evidence.
A written assertion from management regarding their actions or position with regard to assertions.
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Explain the subsequent events review audit procedure to obtain audit evidence.
- Activities for the period after the balance sheet date through the date of the auditor's report that materially affect balances that occurred prior to the balance sheet date.
- Be especially aware of
- ** contingencies
- ** unrecorded liabilities
- ** disclosures
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