Ch09 PrinciplesOfAuditing Ed3
Chapter 9
Auditor’s Response to Assessed Risk (ISA 330 ISA 500)
9.1 Learning Objectives
After studying this chapter, you should be able to:
1 List audit procedures responsive to assessed risk
2 Know the definition of evidence in an audit and legal sense.
3 Differentiate between nature, extent and timing of audit procedures.
4 Understand the difference between legal evidence and audit evidence.
5 Identify the common management assertions for classes of transactions, account balances and disclosure.
6 Define the management standard assertions: completeness, occurrence, accuracy, rights and obligations, valuation, existence, cutoff, classification, understanding, presentation and disclosure, and measurement.
7 Discuss the systematic process of gathering evidence.
8 Recognize tests of controls for design and effectiveness.
9 Charaterize a substantive procedure.
10 Explain what is meant by the nature, timing, and extent of substantive procedures.
11 List and define the two types of substantive procedures.
12 Realize the process of search for unrecorded liabilities.
13 Describe the components of and the meaning of “sufficient appropriate audit evidence.”
14 Determine which evidence is relevant and which evidence is reliable.
9.2 Introduction
Evidence gathering procedures in auditing are directed by the assessment of risk of material misstatement. ISA 330 states1, “The objective of the auditor is to obtain sufficient appropriate audit evidence regarding the assessed risks of material misstatement, through designing and implementing appropriate responses to those risks.”
Audit Procedures Responsive to the Assessed Risks of Material Misstatement at the Assertion Level
To meet this objective of obtaining sufficient appropriate audit evidence, the auditor must design and perform audit procedures whose nature, timing and extent are based on, and are responsive to, the assessed risks. The nature of an audit procedure refers to its purpose (that is, test of
Auditor’s Response to Assessed Risk (ISA 330 ISA 500)
9.1 Learning Objectives
After studying this chapter, you should be able to:
1 List audit procedures responsive to assessed risk
2 Know the definition of evidence in an audit and legal sense.
3 Differentiate between nature, extent and timing of audit procedures.
4 Understand the difference between legal evidence and audit evidence.
5 Identify the common management assertions for classes of transactions, account balances and disclosure.
6 Define the management standard assertions: completeness, occurrence, accuracy, rights and obligations, valuation, existence, cutoff, classification, understanding, presentation and disclosure, and measurement.
7 Discuss the systematic process of gathering evidence.
8 Recognize tests of controls for design and effectiveness.
9 Charaterize a substantive procedure.
10 Explain what is meant by the nature, timing, and extent of substantive procedures.
11 List and define the two types of substantive procedures.
12 Realize the process of search for unrecorded liabilities.
13 Describe the components of and the meaning of “sufficient appropriate audit evidence.”
14 Determine which evidence is relevant and which evidence is reliable.
9.2 Introduction
Evidence gathering procedures in auditing are directed by the assessment of risk of material misstatement. ISA 330 states1, “The objective of the auditor is to obtain sufficient appropriate audit evidence regarding the assessed risks of material misstatement, through designing and implementing appropriate responses to those risks.”
Audit Procedures Responsive to the Assessed Risks of Material Misstatement at the Assertion Level
To meet this objective of obtaining sufficient appropriate audit evidence, the auditor must design and perform audit procedures whose nature, timing and extent are based on, and are responsive to, the assessed risks. The nature of an audit procedure refers to its purpose (that is, test of
References: Knapp, M., 2001, “Mattel, Inc,” Contemporary Auditing Real Issues & Cases, South Western College Publishing, Cincinnati, Ohio. pp.3–14. SEC, 1981, Accounting Series Release No. 292, “SEC Charges Mattel, Inc. with Financial Fraud,” US Securities and Exchange Commission, June 22.