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Auditing 2 Middle Exam

The document discusses the concept of evidence, particularly in the context of auditing, highlighting the importance of audit evidence in reviewing financial transactions and internal controls. It emphasizes the necessity of understanding internal controls early in the audit process to make informed decisions about audit procedures and risk assessments. Additionally, it outlines the audit cycle methodology and recommends frequent cycle counting in inventory management to improve accuracy and reduce write-offs.

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Annisa Nabila Kanti
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30 views2 pages

Auditing 2 Middle Exam

The document discusses the concept of evidence, particularly in the context of auditing, highlighting the importance of audit evidence in reviewing financial transactions and internal controls. It emphasizes the necessity of understanding internal controls early in the audit process to make informed decisions about audit procedures and risk assessments. Additionally, it outlines the audit cycle methodology and recommends frequent cycle counting in inventory management to improve accuracy and reduce write-offs.

Uploaded by

Annisa Nabila Kanti
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Annisa Nabila Kanti

155020307121021

Auditing 2 Middle Exam

1. What is an evidence?

Evidence is information that comes closest to the facts of a matter. The form it takes
depends on the context. The findings of high-quality, methodologically appropriate research are
the most accurate evidence. Because research is often incomplete and sometimes contradictory or
unavailable, other kinds of information are necessary supplements to or stand-ins for research.
The evidence base for a decision is the multiple forms of evidence combined to balance with
expedience – while privileging the former over the latter.

What is an audit evidence?

Audit evidence is the information collected for review of a company’s financial


transactions, internal control practices, and other items necessary for the certification of financial
statement by an author or certified public accountant (CPA). The amount and type of auditing
evidence considered vary considerably based on the type of firm being audited as well as the
required scope of the audit.

2. I concluded that Maier is correct in believing that internal controls frequently do not function in
the way they’re supposed to. But, regardless of this, what she did somehow ignores the value of
the beginning the understanding of internal control by preparing or reviewing a rough flowchart.
Obtaining an early understanding of the client’s internal control will provide her with a basis for a
decision about further audit procedures and sample sizes based on assessed control risk. By not
obtaining an understanding of internal control until later in the engagement, Maier risks
performing either too much or too little work, or emphasizing the wrong areas during her audit.
3. The auditor uses the control risk assessments and the results of tests of controls to determine the
appropriate level of detection risk and the nature and extent of substantive tests for the audit
engagement. The auditor links the control risk assessments at the transaction level to the balance-
related audit objectives for the accounts affected by the transaction cycles, and also to the
presentation and disclosure audit objectives.

4. Audit cycle is a process followed by the auditors to approach the audit of financial statements.
The audit cycle is following a methodology that will help the auditor to conduct the audit
efficiently so it can give a reached output to the auditors.

5. Your facility should schedule cycle counting to be a part of the normal operations of the facility.
Schedule cycle counting frequently. The higher the frequency of cycle counting, the higher will
be the accuracy of inventory and lower will be the inventory write-offs. Many warehouse
operations do cycle counts daily counting in different areas of the warehouse each day. Rather
than doing random counts, the most effective way to do cycle counts is classifying items into A,
B, and C groups. It makes sense to spend the most time doing cycle counts with the inventory that
represents the highest value.

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