Ch4 - EOC #5 and #6 CHAPTER 4 AUDIT EVIDENCE AND AUDIT...

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EOC #5 and #6 CHAPTER 4 AUDIT EVIDENCE AND AUDIT DOCUMENTATION 4-1 Auditors typically divide the financial statements into components or segments in order to make the audit more manageable. A component can be a financial statement account or a business (transaction) process. This approach allows the auditor to gather evidence by examining the processing of related transactions through the accounting system from their origin to their ultimate disposition in the accounting journals and ledgers. Thus, the auditor can examine an accounting transaction from the time it is initiated by the entity until its final recording in the financial statement accounts. 4-2 The financial statements contain management's assertions about the various financial statement components. The auditor tests management’s assertions by conducting audit procedures that provide evidence on whether each relevant assertion is supported. The results from applying audit procedures provide the evidence that supports the fair presentation of management’s assertions and the auditor's report (see Figure 4-1). 4-3 Assertions about classes of transactions and events for the period under audit: Assertion Definition Occurrence Transactions and events that have been recorded have occurred and pertain to the entity (sometime referred to as validity). Completeness All transactions and events that should have been recorded have been recorded. Authorization All transactions and events have been properly authorized. Accuracy Amounts and other data relating to recorded transactions and events have been recorded appropriately and properly accumulated from journals and ledgers. Cutoff Transactions and events have been recorded in the correct accounting period. Classification Transactions and events have been recorded in the proper accounts.
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4-4 Assertions about account balances at the period end: Assertion Definition Existence Assets, liabilities, and equity interests exist. Rights and
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Ch4 - EOC #5 and #6 CHAPTER 4 AUDIT EVIDENCE AND AUDIT...

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