Class exercise auditing.

1. Please define audit risk

2. Can you give me the three parts of audit risk

3. Please name all the management assertions

4. List the audit evidence gathering procedures.

5. If you are auditing a clients !ank account" #hich is the !est form of evidence

gathering

$. If you #ere asked to audit a clients inventory #hich method do you think #ould !e

!est for getting the information

%. If you #ere auditing payroll&salaries' #hich procedure do you think #ould !e !est

(. If auditing ho# something is done e.g. ho# the staff do something" #hich procedure

is !est

). Cut off means * that the asset !elongs to the client +,-

1. /0istence * something is there" real +,-

11. ufficiency means the information has the right uality" is appropriate. +,-

12. ppropriate means the information is relia!le" relevant" useful. +,-

13. Please rank these sources according to #hich is !est using num!ers. & /.g.' 1"3"2"5"4

Information from the client.

ral&spoken' information from the client

Printed information

/0ternal * from outside the Co

Information generated !y the auditor himself.

14. Professional skepticism means please choose the one you think is the !est from

these6

a. +he auditor thinks the manager is al#ays lying" cannot !e trusted.

!. +he auditor !elieves everything the manager says

c. +he auditor accepts #hat the manager says !ut #ill try to find another #ay to

prove that it is true or not

d. +he auditor accepts #hat the manager is saying !ut thinks it is possi!le that the

manager may have made a mistake or is !eing a fraud.

e. uditors are 7ust negative people #ho only #ish to find other peoples mistakes.

15. 8ateriality means6

a. omething you can make something out of

!. It means something is important or significant to the financial statements"

c. omething is important to the user of -,

d. omething is important to the user of -, and can influence the choice he makes

!ased on that information.

e. uditors #ant to find #ays to do more #ork.

 

1$. misstatement is6

a. n error or mistake

!. n error #hich makes something more or less than #hat it should !e

c. mistake #hich makes something more than it should !e

d. mistake that makes something less than it should !e.

1%. +here are t#o misstatements please name them.

1(. +ests of Control these look at6

a. 9hether a control is #orking correctly

!. control is there

c. control #as designed correctly and is also #orking correctly

d. +hat the managers are in control of the Co.

e. +hat the o#ners of the Co are in control of the Co.

1). u!stantive procedures look at6

a' -or errors in financial statements

!' peration and design of internal controls

c' 8ateriality of items in the financial statements

d' +hat managers prepare the financial statements

2. +he #hole purpose for an audit is6

a. +he auditor to make money

!. -or an investor or user to !uy shares in a Co.

c. -or an auditor to e0press an opinion on the financial statements

d. +o find errors and fraud in the financial statements.

e. +o make the government happy.