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When performing tests that start with the FS, the auditor is most likely substantiating the ______ assertion, using which substantiating method?
- Existence
- Vouching = to verify its existence
- Trying to ensure management didn't make something up and add it to the FS
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When performing tests that start with the source documents, the auditor is most likely substantiating the _____ assertion, using which substantiating method?
- Completeness
- Tracing = to track to the end
- Trying to ensure the item under review was included in the FS
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What are the 6 FS assertions and a brief description
- (C) Completeness: everything that should be recorded has been recorded
- (O) CutOff: recorded in the proper period
- (V) Valuation, Allocation, Accuracy: recorded at the right amount
- (E) Existence, Occurrence: if we have it recorded it really happened
- (R) Rights and Obligations: we own it or owe it
- (U) Understandability and Classification: recorded in the proper acct
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Why is the receipt of a confirmation that provides an A/R balance evidence for completeness but not valuation?
The external party has confirmed that the account exists (completeness), but even though the account balance is provided, there is no assurance it will be paid. There is no value in an account not paid.
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What assertions are most relevant to the asset, liability, and equity account balances?
- Completeness (liabilities, due to risk of understatement)
- Valuation, Allocation, Accuracy
- Existence (assets, due to risk of overstatement) and Occurrence
- Rights and Obligations
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When audit procedures focus on transactions and events, the most relevant assertions are:
- Completeness
- Cutoff
- Valuation, Allocation, Accuracy
- Existence and Occurrence (revenue, due to risk of overstatement)
- Understandability and Classification
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When audit procedures focus on presentation and disclosure the most relevant assertions are:
- Completeness
- Valuation, Allocation, Accuracy
- Occurrence
- Rights and Obligations
- Understandability and Classification
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Which audit procedures are best used to substantiate the completeness assertion?
- Tracing
- Analytical Review
- Observation
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Which audit procedures are best used to substantiate the cutoff assertion?
Cutoff procedures
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Which audit procedures are best used to substantiate the valuation, allocation, accuracy assertion?
- Inspection
- Footing
- Independent Recalculation
- Reconciliation
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Which audit procedures are best used to substantiate the existence and occurrence assertion?
- Confirmation
- Observation, Inspection, Examination
- Vouching
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Which audit procedures are best used to substantiate the rights and obligations assertion?
Inspection
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Which audit procedures are best used to substantiate the understandability and classification assertion?
- Inspection
- Review
- Inquiry of Management
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