Tutorial 2

2.39

a) Area of operational auditor - at the warehouse where the plant is placed.

b) Sources of criteria @ types of standard are International Standard of Auditing (ISA) & Malaysian Standard of Auditing (MSA).


4.1

Assertions are expresses @ implied representations by management that are reflected in the financial statement components. The 3 components are:
- Transactions & events for the period under audit
- Account balances at the period end
- Presentation & disclosure

Auditor divides the financial statement into components @ segments in order to test management's assertions to ensure that assertion are made to every components:
- Transactions - occurrence, completeness, accuracy, cutoff & classification.
- Account balance - Existence, rights & obligations, completeness, & valuation and allocation.
- Presentation & disclosure - occurrence & rights and obligations, completeness, classification & understandability, & accuracy and valuation.


4.3

Most instances audit evidence is persuasive rather than convincing because audit evidence used by the auditor in arriving at the conclusion is based on auditor's opinion after they found the information in the accounting records underlying the financial statements. Audit evidence is not convincing because an auditor's can't find all the evidence because of time constrains, reliability, credibility & fees.


4.4

Audit procedures for obtaining audit evidence:

1 - Inspection of Records @ Documents
- Inspection consists of examining internal @ external records @ documents that are in the paper form, electronic form, @ other media.

2- Examination of Physical Assets
- This procedure involves the auditor inspecting @ counting of physical asset. Physical examination of tangible assets provides a relatively reliable type of evidence.

3- Observation
- Observation consists of looking at a process @ procedure being performed by others. The actions being observed typically do not leave an audit trail that can be verified by examining records @ documents.

4 - Inquiry
- Inquiry consists of seeking information of knowledgeable persons (both financial & non-financial throughout the entity @ outside the entity. Inquiry is an important audit procedure that is used extensively throughout the audit & often is complementary to performing other audit procedures.

5 - Confirmation
- Confirmation is a specific type of inquiry. It is the process of obtaining a representation of information @ of an existing condition directly from a third party. Confirmations also are used to obtain audit evidence about the absence of certain conditions.

6 - Scanning
- Scanning is the review of accounting data to identify significant @ unusual items. This includes the identification of anomalous individual items within account balances @ other client data through the scanning @ analysis of entries in transaction listings, subsidiary ledgers, general ledger control accounts, adjusting entries, suspense accounts, reconciliations, & other detailed reports.

7 - Computation
- Computation @ recalculation consists of checking the mathematical accuracy of documents @ records. Computation can be performed through the use of information technology.

8 - Re-performance
- Re-performance is the auditor's independent execution of procedures @ controls that were originally performed as part of the entity's internal control, either manually @ through the use of computer-assisted audit techniques (CAATs).

9 - Analytical Procedure
- Analytical procedures are important type of procedures on an audit. They consist of evaluations of financial information made by a study of comparisons & relationships among both financial & non-financial data.



4.5




4.7




4.8

3 general types of audit test are:
1- Risk assessment procedures
- To obtain an understanding of the entity & its environment in order to assess the risks of material misstatement at the financial statement & assertion level that .
- E.g. - Inspection of Records @ Documents
- Inquiry

2- Tests of controls
- To test the operating effectiveness of controls in preventing, @ detecting & correcting, material misstatements at the assertion level based on the auditor's understanding of the entity's internal control.
- E.g. - Re-performance
- Observation

3 - Substantive procedures
- To detect material misstatement at the assertion level based on the assessed risk of material misstatement.
- E.g. -
-


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4.25




4.32