Summary of Audit Procedures and Assertions

Lesson: Summary of Audit Procedures and Assertions

This lesson delves into audit procedures and management assertions, focusing on the various methods employed by auditors to inspect, confirm, and analyze information. These methods include observation, inspection, communication through inquiry and confirmation, as well as verifying accuracy through recalculation, reperformance, and valuation. The lesson also highlights analytical procedures, discussing their application in planning and testing phases. Additionally, the discussion covers management assertions, detailing tests for completeness, cut-off, accuracy, allocation, valuation, existence, and occurrence. Throughout the lesson, Nick Palazzolo emphasizes the importance of understanding these concepts and provides examples, helping to reinforce their application in real auditing situations.

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Instructor: Nick Palazzolo

Nick Palazzolo is head instructor of ExamPrep.ai CPA Review. Nick's teaching style is engaging & upbeat, combining practical Big 4 tax & assurance expertise with years of 1-on-1 coaching. His lessons are concise and emphasize what you need to know to pass. Whether you're a recent grad or working full-time, we’re confident you can conquer your CPA exams with Nick’s review.

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Here's where we really start to have fun when we come to these accounting procedures, our assertions, what we're going to do, observation, inspection, inquiry, confirmation, right? Starting to sound familiar. Now let's take a look. First off, if we are in the process, we're in the business of examining or inspecting, what are these going to be related to? Well, I'm going to say more so observation, which this is going to be witnessing a process or the existence of something, generally more so related to possibly tests of controls. We've also got the process of inspection. This is similar to observation. However, this is the process of choosing a sample of what was observed and then confirming something related to that. For communication, these two that we're going to do are inquiry and confirmation. Now for inquiry, this is generally asking someone something. You need to be asking someone questions for it to be an inquiry, simply asking about anything. This could be inquiring about internal controls, inquiring about a specific transaction, literally anything. It could be inquiring of the legal counsel. It could be inquiring of management, of random employees, of internal audit, board of directors, anyone there. Confirmation, in here, you don't necessarily need to talk to a third party. However, this is the confirming the existence of something with that third party, such as accounts receivable confirmations, bank confirmations. If we are trying to verify the accuracy of something, we are going to do one of the three. We are going to focus on recalculation, which is checking the accuracy of math. A simple way of doing this would be for interest expense. You take the outstanding balance of debt, multiply it by the time, multiply it by the interest rate. We've got reperformance. This

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