Podcast
Questions and Answers
What is the primary task of the auditor in relation to the organization's financial statements?
What is the primary task of the auditor in relation to the organization's financial statements?
- To create the financial statements
- To ensure the financial statements are fairly presented (correct)
- To determine the management assertions
- To design computer controls
Which of the following is NOT one of the management assertions about the financial health of an entity?
Which of the following is NOT one of the management assertions about the financial health of an entity?
- Rights and Obligations
- Completeness
- Accuracy or Precision (correct)
- Existence or Occurrence
What is the purpose of substantive tests in an audit?
What is the purpose of substantive tests in an audit?
- To determine whether internal controls are functioning properly
- To corroborate management assertions
- To ensure accounting databases reflect transactions accurately (correct)
- To gather evidence relating to the reliability of computer controls
What is the role of auditors when ascertaining materiality in an audit?
What is the role of auditors when ascertaining materiality in an audit?
Which type of tests help auditors establish whether internal controls are functioning properly?
Which type of tests help auditors establish whether internal controls are functioning properly?
What type of evidence is sought by auditors in the IT environment?
What type of evidence is sought by auditors in the IT environment?
What is the main focus of a Financial Audit?
What is the main focus of a Financial Audit?
Which standard is applied to ensure financial statements are in compliance with generally accepted accounting principles?
Which standard is applied to ensure financial statements are in compliance with generally accepted accounting principles?
Why is a logical framework important for conducting an audit in an IT environment?
Why is a logical framework important for conducting an audit in an IT environment?
What is a significant component of both external (financial) and internal audits due to modern information systems?
What is a significant component of both external (financial) and internal audits due to modern information systems?
Why is a systematic approach particularly important in the IT audit environment?
Why is a systematic approach particularly important in the IT audit environment?
Which type of audit focuses on the computer-based aspects of an organization’s information system?
Which type of audit focuses on the computer-based aspects of an organization’s information system?
Study Notes
Financial Audit vs. CIS Audit
- Financial auditing ensures a corporation's internal controls, guidelines, mechanisms, and policies are adequate, functional, and compliant with regulatory standards.
- Financial auditing applies GAAS to ensure financial statements are accurate, complete, and compliant with GAAP.
- CIS audit focuses on the computer-based aspects of an organization's information system, including assessing proper implementation, operation, and control of computer resources.
Basic Components of an Audit
Systematic Process
- Conducting an audit is a systematic and logical process that applies to all forms of information systems.
- A systematic approach is particularly important in the IT environment due to the lack of physical procedures.
Management Assertions
- Management assertions are a set of claims about the financial health of an entity.
- The auditor's task is to determine whether the financial statements are fairly presented.
- Management assertions include:
- Existence or Occurrence
- Completeness
- Rights and Obligations
- Valuation or Allocation
- Presentation and Disclosure
Obtaining Evidence
- Auditors seek evidence that corroborates management assertions.
- In the IT environment, evidence is gathered relating to the reliability of computer controls and the contents of databases.
- Evidence is collected through:
- Tests of controls (establishing internal controls functionality)
- Substantive tests (determining accounting databases accuracy)
Ascertainment of Materiality
- The auditor must determine whether weaknesses in internal controls and misstatements are material.
- Assessing materiality is an auditor's judgment.
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Description
Explore the differences between Financial Audit and CIS Audit, focusing on internal controls, guidelines, compliance with regulatory standards, and GAAS. Understand the importance of ensuring accurate financial statements and compliance with industry requirements.
