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Flashcards in Key financial statement figures Deck (43)
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1
Q

Which assertion is addressed by the physical verification of assets selected from the non-current asset register?

A

Existence

2
Q

Which assertion is addressed by the inspection of title deeds for property?

A

Rights and obligations

3
Q

Which assertion is addressed by the inspection of vehicle registration documents?

A

Rights and obligations

4
Q

Which assertion is addressed by the inspection of share certificates?

A

Rights and obligations

5
Q

Which assertion is addressed by the inspection of purchase invoices?

A

Rights and obligations

6
Q

Which assertion is addressed by the tracing of the non-current assets register to a sample of assets actually seen by the auditor.

A

Completeness

7
Q

Which assertion is addressed by the inspection of purchase invoices for cost

A

Valuation

8
Q

Which assertion is addressed by the inspection of a surveyor’s report for revaluations

A

Valuation

9
Q

According to ISA 501, how must an auditor approach an inventory count?

A

The auditor must attend the inventory count

10
Q

What evidence can auditor obtain at the inventory count ensure?

A
  1. Provides evidence of the quantity
  2. Auditor gathers evidence over valuation by identifying items that are damaged, old, etc, as these may need to be scrapped or sold at a discount
11
Q

What steps should an auditor take before an inventory count?

A
  1. Review locations and count instructions
  2. Consider whether expert help is required
  3. Review systems of control and internal auditor arrangements
  4. Arrange to verify any inventory held at third party premises
12
Q

What steps should an auditor take during an inventory count?

A
  1. Observe counts for compliance with instructions
  2. Check cut-off arrangements
  3. Identify procedures for keeping any third party inventory separate from the client’s inventory
  4. Perform two way test counts
  5. Identify any slow-moving or old inventory that may require impairment
13
Q

What steps should an auditor take after the inventory count?

A

Follow up the sample selected for test counting to check the correct quantity has been included in the final inventory listing

14
Q

Which assertion is addressed by taking a sample of items already counted by the client from the count sheets and agreeing to the number of items in the warehouse?

A

Existence

15
Q

Which assertion is addressed by seeking confirmation from third parties about inventory held on their behalf at the client, or held at their premises for the client?

A

Rights and obligation

16
Q

Which assertion is addressed by taking a sample of items in the warehouse and counting them, then agreeing to the client’s count sheets?

A

Completeness

17
Q

Which assertion is addressed by agreeing costs to purchase invoice?

A

Valuation

18
Q

Which assertion is addressed by agreeing materials cost to invoice for inventory manufactured by the company?

A

Valuation

19
Q

Which assertion is addressed by agreeing labour costs to payroll for inventory manufactured by the company?

A

Valuation

20
Q

Which assertion is addressed by evaluating the reasonableness of assumptions underlying overhead calculations, and reperforming the calculations, for inventory manufactured by the company?

A

Valuation

21
Q

Which assertion is addressed by inspecting post year-end sales invoices for evidence of actual selling prices?

A

Valuation

22
Q

Which assertion is addressed by inspecting order books/price lists for items not sold by the time of the audit?

A

Valuation

23
Q

Which assertion is addressed by reviewing the aged inventory listing to identify old or slow-moving items, and discussing the need for impairment with client management?

A

Valuation

24
Q

What does the audit of receivables focus on?

A
  1. Whether the customer agrees with the recorded balance

2. Whether the debt is likely to be paid

25
Q

Which assertions are addressed by obtaining direct confirmation of receivables balances from customers?

A
  1. Existence

2. Rights and obligations

26
Q

Which assertion is addressed by inspecting the post year-end bank statements to identify cash received from customers for a sample of receivables selected from the receivables ledger?

A

Valuation

27
Q

Which assertion is addressed by discussing the allowance for doubtful debts with client management?

A

Valuation

28
Q

Which assertion is addressed by evaluating the reasonableness of the client’s assumptions and re-performing any calculations?

A

Valuation

29
Q

What are the stages of customer confirmations?

A
  1. Auditor prepares confirmation requests
  2. Client sends requests to customers
  3. Customers send replies direct to auditor
30
Q

When should negative confirmation letters to customers be used?

A
  1. The risk of misstatement i slow
  2. Controls are operating effectively
  3. A large number of small balances are involved
  4. There is no reason to believe that customers will disregard the request
31
Q

Which assertion is addressed by agreeing the reconciling items in the bank reconciliation to the post year-end bank statements to confirm they are reasonable?

A

Valuation

32
Q

Which assertion is addressed by confirming bank balances directly with the bank?

A
  1. Rights and obligations

2. Existence

33
Q

Which assertion is addressed by counting material cash balances held at the client?

A

Existence

34
Q

What are the stages of bank confirmations?

A
  1. Auditor prepares confirmation request
  2. Client signs and sends the confirmation request to the bank
  3. The bank sends confirmation directly to the auditor
35
Q

How should payables be sampled?

A

From a reciprocal population

36
Q

Which assertion is addressed by obtaining a sample of supplier statement reconciliations performed by the client and testing the reconciling items?

A

Completeness

37
Q

Which assertion is addressed by obtaining direct confirmation from lenders of balances, accrued interest, and any security held against the loan?

A

Completeness

38
Q

Which assertion is addressed by inspecting board minutes for evidence of new loans?

A

Completeness

39
Q

Which assertion is addressed by confirming repayments are in accordance with loan agreements?

A

Completeness

40
Q

Which assertion is addressed by recalculating the split of the loan between current and long-term?

A

Presentation and disclosure

41
Q

Which assertion is addressed by inspecting the financial statements disclosure note for adequecy

A

Presentation and disclosure

42
Q

Which assertions are addressed by verifying interest charged for the period and the adequacy of accrued interest?

A
  1. Accuracy

2. Cut-off

43
Q

What is the key financial statement assertion?

A

Completeness