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IIA Chapter 10
IIA's book, chapter 10: Audit evidence and working papers
Terms in this set (36)
the state of mind in which internal auditors take nothing for granted; they continuously question what they hear and see and critically assess audit evidence
Persuasive audit evidence
This enables the internal auditor to formulate well-founded conclusions and advice confidently. To be persuasive, the evidence must be relevant, reliable, and sufficient
the risk of reaching invalid audit conclusions and/or providing faulty advice based on the audit work conducted.
Is the evidence pertinent to the audit objective? Does it logically support the internal auditor's conclusion or advice?
Did the evidence come from a credible source? Did the internal auditor directly obtain the evidence?
Has the internal auditor obtained enough evidence? Do different, but related, pieces of evidence corroborate each other?
Specific tasks performed by the internal auditor to gather the evidence required to achieve the prescribed audit objectives.
The majority or evidence falls under this category. Degrees of reliability range from low to high depending on the type of document.
Steps to audit procedures
Obtain a thorough understanding of the auditee, including the auditee's objectives, risks, and controls
Test the design adequacy and operating effectiveness of the targeted area's system of internal controls
Analyze plausible relationships among different elements of data
Directly test recorded financial and nonfinancial information for errors and fraud.
Nature of audit procedures
this relates to the types of tests the internal auditor performs to achieve their objectives.
Extent of audit procedures
this pertains to how much audit evidence the internal auditor must obtain to achieve their objectives
Timing of audit procedures
This pertains to when the tests are conducted and the period of time covered by the tests.
Manual audit procedures
asking questions of auditee personnel or third parties and obtaining their oral or written responses. It produces indirect evidence, which is rarely persuasive.
watching people, procedures, or processes. It is generally considered more persuasive than inquiry in the sense that the internal auditor is obtaining direct evidence.
studying documents and records and physically examining tangible resources. This provides direct evidence of contents or existence of documents or tangible resources
tracking information backward from one document or record to a previously prepared document or record, or to a tangible resource. This goes from most current record back to its source documents. Tests validity of current document
Tracking information forward from one document, record, or tangible resource to a subsequently prepared document or record. This tests the completeness of the most recent document.
Redoing controls or other procedures in order to ensure they are effective or being done correctly. This provides direct evidence regarding its operating effectiveness.
Assessing information obtained during an engagement by comparing the information with expectations identified or developed by the internal auditor. Includes analysis of common-size statements, ratio analysis, trend analysis, analysis of future-oriented information, external benchmarking, internal benchmarking.
Analysis of common-size financial statements
The internal auditor expresses financial statement line items as percentages of relevant totals.
The internal auditor calculates pertinent financial ratios and ratios involving nonfinancial values.
The internal auditor compares performance information for the current period with like information for one or more prior periods.
Analysis of future-oriented information
The internal auditor compares current fiscal period information with budgets or forecasts
the internal auditor compares performance information for the org with like information of other orgs or the industry.
the internal auditor compares performance information of one organizational unit with like information for other organizational units
Obtaining direct written verification of the accuracy of information from independent third parties. This is generally considered very reliable because it comes to the internal auditor directly from independent third parties.
These ask the party to respond regardless of whether or not the information is correct. It is more reliable
These ask the party to respond only if the information in the communication is wrong or negative.
Computer-Assisted Audit Techniques(CAAT)
Any automated audit technique, such as generalized audit software, test data generators, computerized audit programs and specialized audit systems.
Generalized audit software
multipurpose software that can be used for general purposes such as record selection, matching, recalculation and reporting
computer programs provided by a computer hardware manufacturer or software vendor and used in running the system. This technique can be used to examine processing activities; to test programs, system activities, and operational procedures; to evaluate data file activity; and, to analyze job accounting data.
simulated transactions that can be used to test processing logic, computations and controls actually programmed in computer applications
Using computerized techniques to perpetually audit the processing of business transactions
These are the papers that document information that the internal auditor has found; a record of evidence from the audit. Should follow a standardized format in the audit environment. Should allow documents to cross-reference each other.
Who is responsible for establishing working paper policies and procedures?
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