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Key Audit Topics - Final Comp Exam

This document outlines 25 key audit topics covered in a final comprehensive exam for an auditing course. The topics include external audits, materiality, audit opinions, management assertions, internal control objectives, internal controls testing, audit risk models, sampling risks, audit evidence, analytical procedures, fraud indicators, professional skepticism, cash controls, assurance engagements, audit correspondence, confirmation types, and common payroll risks.

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100 views3 pages

Key Audit Topics - Final Comp Exam

This document outlines 25 key audit topics covered in a final comprehensive exam for an auditing course. The topics include external audits, materiality, audit opinions, management assertions, internal control objectives, internal controls testing, audit risk models, sampling risks, audit evidence, analytical procedures, fraud indicators, professional skepticism, cash controls, assurance engagements, audit correspondence, confirmation types, and common payroll risks.

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nevilalopariyahoo.com
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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IAF520 - Key Audit Topics

Final Comprehensive Exam

1. External Audits: Management responsibilities vs. Auditor responsibilities

2. Materiality - quantification using professional judgment - maximum error tolerance - consider


both quantitative and qualitative matters (ie) errors/mistakes in previous audits, adequacy of
key controls

3. Audit opinions: unmodified vs. qualified (“except for” clause due to GAAP or scope issue),
Adverse opinion - material and pervasive GAAP issue, Denial/disclaimer of opinion - material
and pervasive scope limitation issue

4. Management assertions:
i. existence,
ii. completeness,
iii. ownership,
iv. valuation, and
v. presentation

5. Internal control objectives of auditors:


i. validity,
ii. completeness,
iii. authorization,
iv. accuracy,
v. classification, and
vi. proper period

6. Internal controls (general, I.T., physical & cash) - understand, assess & test - leads to
identification of strengths & weaknesses, determination of extent of substantive testing and
recommendations of additional/revised procedures required to mitigate weaknesses

7. Audit Risk Model AR = CR x IR x APR x RIA (incorporation of analytical procedures risk and risk
of incorrect acceptance)

8. Good/poor controls - impact on substantive testing

9. Audit approaches/strategies:
 controls-based testing
 substantive-based testing
 combined - controls & substantive testing

10. Sampling risks - efficiency risk (assess control risk too high, over-auditing) vs effectiveness risk
(assess control risk too low, under-auditing). Which risk is more important auditors?

11. Sampling risk vs. non-sampling risks


12. Audit Cycles - sales & A/R & cash receipts, purchases & payables & cash payments, payroll &
production, finance and investments etc. - all audit cycles have cash control implications

13. Audit Evidence - sufficient (enough), appropriate (relevant & reliable)

14. Types of audit evidence gathering techniques: )


I. inspection,
II. observation,
III. confirmation,
IV. re-performance/re-calculation,
V. analysis, and
VI. inquiry

15. Audit Risk and Audit Evidence - relationship

16. Analytical Procedures (substantive in nature) - ratios/formulas/comparisons, commonly used


during audit planning & final audit review

17. Common red flags (indicators) of fraud:

 missing documents,
 unusual endorsements,
 unexplained accounting entries or adjustments,
 poor management,
 old/unusual reconciling items
 ineffective (or non-existent) internal controls
18. Extended audit procedures to consider when fraud is likely/suspected - to be focused in the
area where the audit is suspected (ie) Payroll or Inventory or Fleet Management, etc.:

 inquiries
 review of journal entries
 surveillance
 compare to previous year(s)
 compare to budget
 ledger account analysis
 review of accounting “estimates”
 expenditure analysis
 vertical analysis
 horizontal analysis
 other relevant analytical procedures

19. Professional scepticism - questioning management representations, obtaining corroborating


evidence - “assume nothing, verify everything”

20. Cash controls for cash receipts & cash payments, petty cash and payroll - cash balancing, petty
cash item dollar limit, petty cash amount, expenditure authorization, review of cash
transactions, regular deposits of cash & cash equivalents, security of petty cash fund, pre-
numbered cheques, monthly reconciliations, technological controls, bonding of employees,
rotation of duties, segregation of cash handling/cash accounting duties/bank reconciliation
duties.

21. Types of assurance engagements: Audit (reasonable assurance), Review (negative assurance) &
Compilation (virtually no assurance) - audit procedure similarities & differences, costs, resources
required, expertise requirement, independence of practitioner

22. Common audit correspondence (purpose, who initiates, who receives, timing):
 engagement letter
 audit planning memo
 internal control deficiencies memo
 confirmations (A/R, banks)
 lawyer letters
 management representation letter
 management letter
 significant audit findings (a.k.a. management letter)
 audit report

23. Confirmations: Positive vs Negative - similarities & differences, which type of A/R confirmation
provides better audit evidence?

24. Good general internal controls: segregation of incompatible duties, adequate supervision,
regular & independent reconciliations, rotation of duties, pre-numbered documents, up-to-date
policies & procedures, regular training etc.

25. Common Payroll risks: paying fictitious employees, over-payment of employees, incorrect
accounting for payroll costs

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