Question

Explain the relationship between the occurrence? transaction-related audit objective and the existence and completeness? balance-related audit objectives.

Answer 1

Solution

The objective of conducting audit on financial statement is to express an opinion as to the fairness with which the financial statements present fairly, in all material respects, the financial position, results of operations, and cash flows, in conformity with generally accepted accounting principles.”

General transaction-related objectives:

1. Occurence : recorded transactions exist;
2. Completeness :existing transactions are recorded;
3. Accuracy : recorded transactions are stated at right amounts
4. Classification : transactions are properly classified;
5. Timing : transactions are recorded on the correct dates;
6. Posting and summarization : recorded transactions are properly included in the master files and are correctly summarize

Balance-related audit objectives:

1. Existence :amounts included exist
2. Completeness :existing amounts are included
3. Accuracy :amounts included are stated at correct amounts
4. Classification :amounts included in the client's listing are properly classified
5. Cutoff :transactions near the balance sheet date are recorded in the proper period
6. Detail tie-in :details in the account balance agree with related master file amounts, foot to the total in the account balance, and agree with the total in the general ledger
7. Realizable value : assets are included at the amounts estimated to be realized