Questions and Answers
Auditing is an unplanned, haphazard process of evaluating evidence regarding economic actions.
False
Audit assertions are claims made by a firm's management about the accuracy of financial statement elements.
True
The term 'occurrence' in auditing refers to whether the transactions have actually happened and relate to the entity.
True
A systematic process in auditing is defined by its randomness and lack of structure.
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Evidence collected during an audit process can be either inconclusive or conclusive, as long as the process remains objective.
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Relevant tests in auditing may include selecting samples from the sales account and verifying them against invoices.
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The process of evaluating evidence in auditing is subjective and dependent on individual auditor opinions.
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Audit assertions do not require validation by auditors due to their inherent nature.
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Study Notes
Overview of Auditing
- Auditing is a systematic process aimed at objectively obtaining and evaluating evidence regarding selected assertions about economic actions and events.
- The goal is to assess the correspondence between assertions and established criteria, and communicate the results to intended users.
Systematic Process in Auditing
- A systematic process is characterized by a logical, purposeful, and structured approach to decision-making.
- This approach contrasts with unplanned and haphazard methods of conducting audits.
Evidence Collection
- Evidence collection is a fundamental component of auditing, requiring objectivity in both gathering and evaluating evidence.
- The nature of evidence may vary in conclusiveness, impacting the overall audit findings.
Audit Assertions
- Audit assertions are claims made by a company's management related to the accuracy of items in financial statements and accompanying disclosures.
- These assertions require auditors to validate their correctness through thorough testing and analysis.
Key Assertion: Occurrence
- Occurrence refers to the requirement that recorded or disclosed transactions have genuinely taken place and are indeed related to the entity being audited.
- This assertion ensures the authenticity of financial information presented in the statements.
Relevance of Testing
- Relevant auditing tests may involve selecting a sample of entries from the sales account within the general ledger.
- Auditors trace these entries to relevant sales invoices, supporting documentation, and customer orders to verify the accuracy and legitimacy of the transactions.
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Description
This quiz covers the systematic process of auditing, focusing on the collection and evaluation of evidence related to economic actions. Understand the importance of established criteria in making informed decisions and how results are communicated to users. Test your knowledge on key concepts and methodologies of auditing.
