Audit Planning and Methodology Flashcards

What is the primary difference between a 'financial audit' and a 'performance audit' under GAGAS?

Answer: Financial audits assess whether financial statements are fairly presented; performance audits evaluate economy, efficiency, and effectiveness of programs

Financial audits focus on the fair presentation of financial statements, while performance audits evaluate whether programs achieve intended results effectively and efficiently.

What is a 'management letter' in the context of a government financial statement audit?

Answer: A communication from the auditor to management conveying less significant internal control observations not required in the auditor's report

A management letter communicates observations and recommendations about internal controls that are below the threshold for required reporting but still merit management's attention.

In planning a government performance audit, what does 'evaluability assessment' help determine?

Answer: Whether a program is ready to be audited — including whether performance data exists and criteria can be established

An evaluability assessment determines whether sufficient data, criteria, and program information exist to allow a meaningful and conclusive performance audit.

What is 'confirmations' as an audit procedure in a government financial audit?

Answer: Obtaining direct written responses from third parties (banks, debtors) to verify account balances or terms

Confirmations obtain independent written responses directly from third parties, providing highly reliable evidence about the existence and accuracy of account balances.

When an auditor uses the work of a specialist in a government audit, what is the auditor's responsibility?

Answer: The auditor must evaluate the specialist's qualifications, objectivity, and the reasonableness of their work

The auditor remains responsible for the audit conclusions and must evaluate whether the specialist is qualified, independent, and whether their findings are reasonable and consistent with other evidence.

What does 'analytical procedures' as an audit technique involve?

Answer: Evaluating financial and non-financial information by studying plausible relationships and investigating unusual fluctuations or items

Analytical procedures compare recorded amounts against expectations based on prior periods, budgets, or industry benchmarks to identify anomalies requiring further investigation.