Basic Auditing Procedures

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Applying Professional Judgment When Performing an Audit

In addition to being thorough and unbiased when evaluating audit evidence, you also want to apply professional judgment by adopting an attitude of professional skepticism. When exercising professional [more…]

How to Brainstorm with Audit Team Members

When you are performing an audit, it’s a good idea to discuss how your client may be perpetrating fraud with your team members. Brainstorming is a very useful tool, as one member of the team may have an [more…]

How to Document Audit Evidence

From the initial client interview all the way down to issuing the audit report, as an auditor you have to keep a record of all the work you do. This information is kept in the audit file and shows the [more…]

When Do You Need to Audit Internal Controls?

When you audit publicly traded companies, federal regulations dictate that you must audit internal controls that affect financial reporting. But what about audits of privately owned companies? Do you always [more…]

How to Assess Internal Control Procedures

During an audit, you have to assess your client’s control risk. This audit procedure involves evaluating control risk, which means you need to find out as much as you can about your client’s internal control [more…]

How to Use Sampling to Test Internal Controls

Even a very small company produces voluminous records; no auditor could ever audit all the records available and still get the audit done in time for the data obtained to be relevant. Sampling allows you [more…]

How Large Should an Audit Sample Be?

For many audits, looking at 10 percent of the records that a company has produced during the past year may be just right. But that number isn’t always going to work. Your job as an auditor is to choose [more…]

What Types of Evidence Should You Sample During an Audit?

Because businesses generate so much paperwork, auditors can’t possibly sort through all of it. Instead you review a sample. You don’t include every type of client information in an auditing sample. Here [more…]

How Does Attribute Sampling Work?

Auditors choose from several types of sampling when performing an audit. Attribute sampling means that an item being sampled either will or won’t possess certain qualities, or attributes. An auditor selects [more…]

How Does Monetary Unit Sampling Work?

Auditors use monetary unit sampling, also called probability-proportional-to-size or dollar-unit sampling, to determine the accuracy of financial accounts. With monetary unit sampling, each dollar in a [more…]

How Does Classical Variables Sampling Work?

When using classical variables sampling, auditors treat each individual item in the population as a sampling unit. This method is most like the statistics classes you had to take in high school and college [more…]

How to Use Nonstatistical Sampling in Your Audits

You can choose your audit sample without using any type of specific statistical sampling method. The basic premise of statistical and nonstatistical sampling is the same. However, when performing an audit [more…]

Different Ways to Set Sample Size In an Audit

You can use several methods to determine the size of an audit sample. You can set the audit sample size based on tolerable and expected error or the previous year’s policy. You can use tables and software [more…]

How to Classify Contingent Liabilities

As you perform your audit, you have to determine how important a contingent liability is to the audit. A contingent liability can come in three categories, and the category it falls into gives you guidance [more…]

How to Recognize Contingent Liabilities During an Audit

Knowing what a contingent liability is and how to handle it is great, but suppose the client doesn’t tell you it has contingent liabilities? To protect the good name of your CPA firm you need to find all [more…]

Practicing Due Diligence in Auditing

After you finish auditing all your client’s business and financial processes, you must perform due diligence before you issue your audit report. Due diligence [more…]

Assessing Events After the Balance Sheet Date

As an auditor, you must address all relevant events that take place after the balance sheet date but before you issue your report. For example, your audit client may be breathing a sigh of relief because [more…]

How to Sleuth for Subsequent Events

When performing due diligence in an audit, you have to address all relevant events that take place after the balance sheet date but before you issue your report. These are called subsequent events and [more…]

Identifying Subsequent Events That Require Disclosure

As you are performing due diligence in your audits, you take subsequent events into account. There are three Type II events that you should investigate to determine whether you need to disclose in the [more…]

Finding Material Changes to Debt or Equity

If your audit client has material debt or equity transactions after the balance sheet date, you must disclose the debt or equity in your audit report as well. This type of subsequent event may include [more…]

How to Find Contingent Liabilities

All auditors must know what a contingent liability is and how to handle it, but suppose your audit client doesn’t tell you it has contingent liabilities? What can you do to protect the good name of your [more…]

How to Assess Going-Concerns

You initially evaluate going-concern when deciding to accept a company as an audit client. You reevaluate the client’s ability to continue as a going-concern as you wrap up the audit. The term [more…]

What to Include in an Unqualified Audit Report

Auditors issue an unqualified report after they gather sufficient competent evidence and conduct the audit according to generally accepted auditing standards [more…]

How to Determine When an Unqualified Audit Report Isn’t Sufficient

Three circumstances may preclude you from issuing an unqualified report when you complete your audit. For example, if your client limits what actions you can take and what records you can look at, and [more…]

Types of Audit Reports You Can Issue Besides Unqualified

If for some reason, you can’t issue an unqualified report when you complete your audit, you still need to create a report. Three reporting options are available to auditors: the qualified report, the disclaimer [more…]


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