Audit questions

Perform an analysis of the historical background of the Audit.

In 1733 the flying shuttle was invented.

In 1767 appears the spinning and weaving machine powered by hydraulic energy. The industrial revolution is born.

In 1783-1784 a new method of decarburizing iron was discovered. Machinism arises.

Capitalism is born, economic theories of Adam Smith and David Ricardo emerge, such developments affected accounting.

There was no control in the way of accounting, there were no rules to audit the financial statements, which gives rise to a series of deceptions, which caused the fall of the New York Stock Exchange in 1929.

1933 Franklin Delano Roosevelt issues the securities law security acts.

1934 Securities Exchange Act.

1936 A document called: "Tentative Statement of Accounting Principles" is published.

1936 "Examination of the Financial Statements."

1938 The American Institute of Public Accountants is born.

1939 The Accounting Principles committee is created.

Explain the concept of Audit of Financial Statements.

It is the critical examination of the books, records, resources, obligations, equity and results of an entity based on accounting principles, standards, techniques and auditing procedures in order to make a judgment about the reasonableness of financial information. and the issuance of that judgment in an opinion.

Mention generally accepted accounting principles.

Accounting principles are the basic concepts that define and identify the economic entity:

Entity.

Realization.

Accounting period.

That quantify the economic entity.

Original Historical Value.

Economic duality.

Business in Progress.

That refer to the information of the economic entity.

Enough Disclosure.

They have the system requirements.

Comparability.

Relative importance.

How is the Audit classified and explain 3 of them?

It is classified in Fiscal, in internal to mention only the classification seen in class.

The Tax Audit is responsible for reviewing the correct and timely compliance with tax obligations (taxes and other contributions).

Within the Tax Audit we have:

The Audit by programs.

The audit derived from economic studies.

The audit consequence of another audit.

The audit of programs will be carried out by the specific authorities (SAT, INFONAVIT, IMSS), emanate from a normal or special program, normal programs are on an annual basis.

Audits derived from economic studies.

Thanks to the application of Computer Science and Statistics, it is possible to know through mathematical models, the utility of certain branches and therefore the income that could be obtained from these taxable bases for taxes, but if the taxpayers do not pay or it is less than the calculated mathematical model, the authorities will be able to know if there is the possibility of tax evasion or in the event that taxpayers make offers that will increase their costs and decrease their utility, but this condition would not be forever, since if it were it would always cease to be a business for the taxpayer.

The audits consequences of other audits.

By means of compulsory documents, that is, by comparing copies of documents against their original, it is to apply confirmation, declaration and certification techniques by a legally empowered authority, it can be discovered if there is alteration of documents, tax evasion, tax crimes.

Internal Audit is one whose scope of exercise will be by auditors who depend on or are employees of the same organization in which it is performed. The result of their work is for internal purposes of the same organization.

It's divided in:

Administrative. It is in charge of verifying, evaluating and promoting compliance with the phases of the administrative process in the entity, it reviews the quality of the administration.

Operational. It is responsible for promoting efficiency in operations, reviews the quality of operations.

Financial: total or partial examination of financial information.

What is the main objective of the Financial Statements Auditor?

Issue an opinion on the reasonableness of the financial statements, by means of a written document called an opinion, following the accounting principles and auditing standards.

Explain what an auditing standard is.

According to the IMCP, they are the minimum quality requirements that the auditor must have in terms of his personality, the work he performs and the information he provides.

Explain personal norms and their classification.

They are the standards that deal with the characteristics that the auditor should have in reference to his personality.

They are divided into:

Technical training and professional capacity. You must have a professional degree from a recognized university, this will prove that you obtained the necessary technical knowledge. Professional capacity is obtained based on experience and the maturity of the trial.

Professional care and diligence. The accountant is aware of his obligation to society, since it is already due to it, so he will try not to make any mistakes, since he will put all his care in his work.

Mental independence, try that the auditor's judgment cannot be influenced by anyone.

Explain the rules regarding the Execution of Work and its classification.

They are the quality requirements that the auditor must have in the execution of their work.

They are divided into:

Planning and supervision.

The auditor must know the company, in order to plan the procedures, techniques and programs to be carried out in that entity, the extent of the tests to be carried out, the opportunity and the auditor must delegate functions to their assistants, already in the course of the audit you should review the work delegated.

Study and evaluation of internal control.

Know the structure, operations and personnel of the company that is going to be audited in order to establish audit strategies to know how to obtain the necessary information for the audit.

Obtaining sufficient and competent evidence.

The auditor must base his opinion on an objective basis, for which he must obtain sufficient, competent and verifiable, sustainable evidence to support his judgment.

It is important that you do so because your opinion affects third parties.

Explain the rules regarding information and what it consists of.

They are the standards that render the auditor's opinion regarding the critical examination of the financial statements, the product of the audit will be the issuance of the opinion in a written document called an opinion.

They divide themselves:

Information and enforcement standards.

Clarification of the relationship between the financial statements and the audit.

Bases on the application of accounting principles.

Consistency in the application of accounting principles and auditing standards.

Sufficiency of the information following the principle of sufficient disclosure.

The financial information of an entity is presented through financial statements, mention what they are.

Balance sheet.

Edo. Results.

Edo. Variations in capital.

Edo. Of Origin and application of Resources.

Clearly explain the characteristics of the financial information.

Utility, Reliability and Provisionality.

Utility: quality of financial information to be useful to users of the information.

Respond to Content and opportunity.

Reliability: Characteristic by which the user accepts it and uses it to make decisions based on it.

Responds to: Objectivity and verifiability.

Provisionality: It means that the general user of financial information uses it for decision making and can provision and foresee, it is a means and not an end.

Due to the constant change in the economic entity, the information is dynamic and the financial information must express those changes.

Mention who is interested in the Judgment of the Financial Statements and explain 3 of them.

To the owners of the companies.

To directors and managers.

To suppliers and creditors.

To banking, financial and insurance institutions.

To the workers.

TO SHCP.

A SE and SER.

To potential investors.

To shareholders and partners.

To the State and municipalities.

To the general public.

To the owners of the companies because they need to know the operation of the entity where they have contributed or contributed capital and they need to know the profitability of that business and the profits that they leave and the possibility or convenience of reinvesting their dividends.

To the workers. To know the results of the company, know if there was a utility, and receive the PTUE to which they are entitled as expressed in the LFT.

To creditors and suppliers: to know the financial situation of the entity and consider whether or not a line of credit is granted or if it is frozen.

Show an example of the accounting principles.

Entity: set of human, natural and capital resources of a perfectly identifiable entity, it can be a natural person or a legal person or a set of both.

Example: We have a taxpayer named Luisa Hernández Sosa, she has leasing activities, is registered as a natural person, the entity will be Luisa Hernández Sosa and all her income and deductions must come in her name, not accepting any document with another name to integrate it into your accounting.

Accomplishment: Quantification in monetary terms of the transactions with other entities.

Example: when merchandise is purchased from a supplier, the realization occurs when the invoice is made including the amount, content, etc. of the items purchased and the payment of said invoice.

Accounting period. The life of the economic entity is divided into periods.

Example: the annual exercise is divided into monthly periods for the formulation of financial information.

Economic Duality: The entity has resources, these can be internal or external and the sources of these resources constitute the position and payment of the operations.

Example: Acquisition of machinery on credit, external resources come from credit granted by creditors.

Internal resources the new machinery acquired.

Business in progress: the existence of the entity is presumed because it carries out operations and transactions even when it is not installed because it already has costs and expenses that it will recover later.

Example: sale of refrigerator in installments to a customer, it is assumed that the store will continue to operate until the customer pays that credit.

Original historical value: record the value of the operations carried out.

According to the time it was done.

Updates or estimates that are made but mentioning them.

Example. A car is bought, with an amount of $ 35,000, its updated value is depreciated is 3,000, but the historical value of $ 35,000 is still preserved.

Sufficient disclosure: is to present the information clearly and sufficiently to judge the financial situation and the results of operations to be able to make decisions.

Example: Cash account, physical accounting to check those presented in the financial statements.

Relative importance: It is the depth that will be given to the investigation of accounts or items following the criteria of amount or type of account, if errors were found, the importance they have with respect to the entity and whether or not they make issuance impossible of the opinion or report of the auditor.

Example: if the auditor finds that there is a lien on the land account that had not been reported, he will have to decide whether or not the lien amount is important or not, it may only be an amount that does not affect the financial information, for example $ 5.

But you must note these as caveats in your opinion.

Comparability: compare the financial statements to know the evolution of the entity.

Compare the financial statements to know the situation of the entity with respect to others.

Example: comparison of 2000 and 2001 financial statements of a business.

Explain the importance of Decision Making in the Audit.

The auditor has the responsibility to express his opinion through the report as this means that third parties trust his opinion.

It can be practiced to obtain an independent point of view on the financial situation of a company, different from that presented by the directors of the company.

Other times audits are special requirements or needs, among which may be:

To obtain business expansion projects.

Increase in capital.

Fusion projects.

Obtaining credits.

The Administration will make the decisions according to the entity, for them it will need the audit by the independent CP (auditor), who issues an opinion regarding the reasonableness of the financial statements. The auditor may decide what planning he will have to carry out his audit, the procedures to be followed, the techniques to be applied, but he will not be able to decide on the entity and its actions that will be done by the administration, the auditor may make recommendations or opinions on internal control, but will not relieve the Administration of its functions.

Mention the main purpose of the IMCP.

Advocate for the unification of criteria and achieve the implementation and acceptance of standards, principles and basic procedures of ethics and professional performance by its associates.

What is CONPA and what is its fundamental purpose?

CONPA means Audit Standards and Procedures Committee, it will issue the standards that the auditor must follow, the procedures to follow for the proper functioning of the audit and other statements that will be policies, recommendations issued by this Committee.

The public accountant bases his personality on two elements that are:

Professionalism. (Body of knowledge, quality of your work)

Human quality. (It is to have a mature judgment and technical experience that allows you to have objectivity and to make a judgment of the reasonableness of the financial conditions.

What is the code of ethics and how is it classified?

It is the code that contains the set of ethics guides that the public accountant must follow in his / her exercise or for the simple fact of being an accountant even when he / she does not perform or work as such.

It is divided into 5 chapters that are: General rules, of the public accountant in the private sector and public sector, of the independent public accountant as auditor, of the CP in teaching, of sanctions.

And in 12 postulates.

What is professional secrecy?

The CP must keep secrecy of administrative, operational and / or financial matters of the entity, it must not disclose to any person who does not have the authorization to know said data, the authorization is designated by the same entity and the corresponding authorities.

What are audit procedures?

They are the set of investigation techniques applicable to a game or group of games or to a group of facts or circumstances examined through which the CP obtains the necessary bases to support its opinion.

What is the timeliness of audit procedures?

It is the time when the audit procedures are to be applied.

What are audit techniques and what are they?

It is the practical investigation and testing methods that the CP uses to check the reasonableness of financial information that allows it to disregard your professional opinion.

The techniques are:

General study.

Analysis (balances and movements)

Inspection.

Confirmation (Positive, Negative and Soft or blind)

Investigation.

Declarations.

Certification.

Observation.

Calculation.

What is sampling in the Audit?

It consists of the application of a compliance or substantive procedure to less than all of the items that make up the balance of an account or class of transaction accounts, which allows the auditor to obtain and evaluate the evidence of some characteristic of the balance or of the transactions and allow a conclusion to be reached.

The sampling technique in the Audit is based on:

Random selection.

Types of random selection.

Systematic selection.

Game selection by using a constant interval between one selection and another.

Casual selection.

Representative sampling of the total universe with no intention of including or excluding specific units, biased selection is avoided.

Why is the study and evaluation of internal control carried out?

It is carried out to comply with the audit standard related to the execution of the work, which is the study and evaluation of the existing internal control to serve as a basis for determining the DEGREE OF CONFIDENCE that you are going to place in it and allow you to determine:

NATURE.

EXTENSION.

OPPORTUNITY that you will give to the audit procedures.

The knowledge and evaluation of internal control should allow the auditor to establish a relationship between the quality of internal control and the scope, timing and nature of the audit tests.

The weaknesses and deviations of the CONT. INT. They must be communicated by the auditor as "SITUATIONS TO REPORT".

What is the structure of Internal control?

In Policies and procedures established to provide REASONABLE SECURITY, in order to achieve the specific objectives of the entity.

What are the elements of the CONT. INT.?

Control environment.

Accounting system.

Control procedures.

What is the control environment?

Represents the combination of factors that affect the policies and procedures of an entity, strengthening or weakening its controls.

Factors:

Structure of the organization.

Functioning of the Board of Directors.

Methods for assigning authority and responsibilities.

Methods of control supervision and monitoring of policies.

Personnel policies and practices.

Administrative control methods.

External influences.

What is the Accounting System?

It consists of the methods and records established to identify, gather, analyze, record and produce quantitative financial information on the operations carried out by an entity.

To be useful and reliable it must:

Identify and record only actual transactions.

Timely describe all transactions in detail necessary for their classification.

Quantify the value of operations in monetary units.

Record the transactions in the corresponding period.

Present and properly disclose such transactions in the financial statements.

What are the control procedures?

They are the procedures and policies additional to the amb. Control and cont. Established by management to provide reasonable assurance of achieving the entity's specific objectives.

Types of procedures:

Preventive character (avoid mistakes)

Detective character, (detect errors or deviations)

What are the control procedures for?

Due authorization of transactions and activities.

Adequate segregation of duties and responsibilities.

Design and use of appropriate documents and records that ensure the correct recording of operations.

Establishment of security devices.

Independent verification of the performance of others.

Adequate evaluation of operations.

What should be considered for the study and evaluation of internal control?

The size of the company.

Industry characteristics.

Organization of the entity.

Nature of the entity.

Specific problems.

Legal requirements.

What are the limitations of internal control?

Misunderstandings of instructions.

Judgment errors.

Neglect.

Distractions or staff fatigue.

Collusion between people.

If management ignores policies.

What is the preliminary evaluation?

The auditor performs a general analysis of the risk implicit in the work to be carried out in order to consider it in the design of its audit work programs and to gradually identify the specific activities and characteristics of the entity.

What should the auditor do in the preliminary assessment?

Understand the control environment.

Describe and verify understanding of control procedures.

Evaluate the design of control systems.

Form a judgment.

Once the auditor has acquired a general understanding of the structure. From internal control, he is able to decide the degree of trust that he will place in internal controls.

What is compliance testing?

They are intended to gather sufficient evidence to conclude whether the control systems established by the Admon. They will prevent or detect and correct potential errors that could affect EFs.

They are designed to support the reliability assessment of procs. Control specifics.

They can include the review of documents, to look for the presence or absence of specific errors (detective controls).

You can set a deviation rate and thus reach a conclusion.

The evidence needs to be established by inquiry, observation, and inspection of doc. The way in which the administration has ensured that the control system continues to operate despite possible changes in the environment.

What are the situations to report?

They represent significant deficiencies in the design or operation of the internal control structure, which could negatively affect the organization's ability to record, process, summarize, and report financial information.

Who are informed of the situations to be reported?

To the Board of Directors.

Owner of the company.

Who have hired it.

What should the auditor do and what should the report contain?

The auditor can make suggestions to improve the structure of internal control.

The report must contain:

Indication of the purpose of the Audit (issuance of opinion of EF nothing more)

Aspects to report.

Restrictions established for the distribution of such communication.

The auditor should consider whether to communicate significant matters during or at the end of the audit.

What must the auditor investigate to adequately evaluate the Control Environment?

Characteristics and integrity of the Administration.

Entity's commitment to the reasonableness of the financial statements.

The Administration's commitment to design and maintain effective accounting systems and internal controls.

What is the organizational and general administration structure for?

To provide an effective basis for the planning, execution and control of the operations of an entity and the issuance of information.

Regarding the structure of the organization.

The auditor should evaluate if the structure is very complex, if the entity has had rapid growth and how they have faced it, if other companies have recently been acquired.

Regarding the structure of the administration.

The auditor must analyze whether the supervision and monitoring of operations are more appropriate and whether there is sufficient supervision and control function of said operations.

The functioning of the Council of Admon.

The auditor must verify if Cons. De Admon has delegated some of its functions to a committee and if this is according to the size and nature of the entity.

To verify its operation, the auditor will evaluate the experience and reputation of its members, if they meet regularly.

Administrative control methods.

The auditor will evaluate:

The presence of a formal planning process and a budget as a tool to monitor results.

The existence of an Internal Audit department.

Accounting system: to evaluate the use of computers it is necessary for the auditor to check:

The degree to which it is used.

The complexity of the environment.

Importance of computer systems.

What is a substantive test?

They are the tests designed to reach a conclusion regarding the balance of an account.

They include techniques such as:

Confirmations Physical observation Calculation Inspection Investigation

On what does the nature and extent of substantive evidence depend?

They depend on the type of volume of errors that could occur in the accounting processes of the company that were not discovered by the internal control procedures used.

The fewer material errors that may occur, the greater the limitation on the scope of substantive testing.

What is audit work planning?

The first phase of the audit process consists of deciding in advance the procedures to be used, the extent to which the tests will be given, the timing of their application, as well as the assignment of the personnel to carry out the work.

What does the auditor need to know to plan properly?

The objectives and conditions and limitations of the work to be performed.

The particular characteristics of the company whose financial information is examined, including:

Operational characteristics Legal conditions Existing internal control system.

What are the legal conditions of a company called?

It refers to the legal documents that make up its personality, its possibility of carrying out operations, its organization, its relationship with the State, the regime of its properties, the contractual conditions.

Through which information is obtained for planning?

Through interviews with the client (determine objective, conditions and limitations of the work, time to be used, fees, coordination of the audit work with the client's staff).

Visits to the facilities and observation of operations to know the operational characteristics of the company and the internal control system.

Interviews with officials Reading of legal documentation Reading of financial information Review of reports and working papers from other audits Preliminary study and evaluation of internal control.

How should supervision be exercised?

Depending on the:

Experience Technical preparation Professional capacity of supervised auditor To be exercised at all levels of staff

The auditor should ensure that the work performed has been supervised by a person of greater experience and professional capacity in such a way that the PC assumes full responsibility for the work as if he had done it personally.

When should you exercise supervision?

In the planning, execution and completion stages of the work.

How do you act in the planning stage?

Analysis of the degrees of technical preparation, experience and professional capacity of the auditors.

Review of the general work plan, definition of objectives.

Discussion of the work plan.

Discussion and setting of the time budget.

How do you act in execution?

Review of the audit program, to make modifications if necessary.

Explanation to the auditors according to the degree of experience that each one has of the way in which the work should be carried out.

Presentation of the auditors to the client's staff.

Constant and close monitoring of work, timely clarification of doubts.

Control of the time invested.

Timely review of work papers.

How do you act at the job completion stage?

Final review of the content of working papers.

Review and approval of the auditor who decides on the resulting report.

What is an audit program?

It is the culmination of the planning process and reflects the judgments made by the Auditor.

What is the audit program for?

For the responsible auditor ---– gives the assurance that the work was planned properly.

For the supervisor ---– serves as the basis for planning supervision.

For the assistant ---– guide for the execution of the work.

It is generally used to:

Develop the audit and obtain satisfactory results.

Guide your assistants in the development of their work.

Control the real time and compare it with the estimate.

Determine the work that needs to be done.

Estimate fees.

Serve as the basis for future audits.

What is a letter of agreement and what is a professional services contract?

The agreement letter is a letter that clearly and precisely specifies the service, definition of the scope and result of the work and the estimate of the fees.

The professional services contract is the document where the wishes of the client and the office that will carry out the audit are agreed, consisting of declarations, clauses and signatures of acceptance of the contract, it is reflected in more depth what is discussed in the letter of agreement.

What are work papers?

They are the set of certificates and documents that the CP prepares or obtains in the development of various Audit phases and that contains the work conditions, found the techniques and procedures that it applied, as well as their extension and timing of the same, the result of accounting records, confirmations from internal sources and external sources.

What are work papers for?

Support your opinion.

Serve as a source of information.

Prove that you did the job with professional quality.

What characteristics should work papers have?

They must be complete, understandable and sufficiently detailed.

Sufficient and competent evidence must be reflected in the working papers.

What are the objectives of the working papers?

That the auditor supports and supports his opinion.

Serve as sources of information.

Evidence of the work done.

Guide for carrying out future audits.

What aspects should be taken into account when preparing the work papers?

Nature of work.

Characteristics of the auditor's report.

Nature and complexity of the business.

Nature and conditions of customer records and degree of reliability of internal controls.

What are the working papers made of?

Examination of books and records and documents that support operations.

Proof of the length of the exam that is practiced.

Extracts from the articles of incorporation.

Contracts concluded.

Analysis of the content of accounting books.

Notes.

These documents are known as cédulas, but when they are ordered and classified as a whole they are called working papers.

Types of evidence in audit.

Physical evidence and documentary evidence.

What documents are the auditor's means of defense that he performed his work?

Work papers.

As:

Extracts of copies of shareholders' meetings.

Information regarding the organizational structure of the entity.

Evidence of the planning process and audit program.

Evidence in the study and evaluation in the existing accounting and internal control system.

Balance transaction analysis.

Record of the nature, scope and timing of the audit procedures.

Indication of who applied these procedures and on what date they were applied.

Letters or documents related to the audit communicated to the client.

Customer statements.

Copy of the financial information examined.

What is planning of work papers?

It is the stage in which the CP determines in advance which working papers it is going to use in the development of the Audit.

Who should prepare the working papers?

The auditor himself or, failing that, someone you trust.

for there to be an excellent planning must take into account:

Get assurance that no detail is escaping.

Provide an orderly and logical sequence of work that reduces time.

Facilitate the division of labor and supervision.

Careful supervision of the preparation of working papers.

Why are working papers so important in the audit?

Because they are the basis of the report that the auditor renders on the financial statements.

They serve as protection for the auditor and must be kept in his possession for any case of doubt, accusation, etc., he can demonstrate that the work was carried out following accounting principles and auditing standards.

You must keep the professional secrecy of these papers because if you do not do so, it violates the code of ethics and may affect third parties and the same company or entity that hired your services.