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00:00:00 – 00:05:11
The video provides an in-depth explanation of key auditing concepts, focusing on the assertions of existence (or occurrence) and completeness. The speaker delineates between two primary auditing tests: vouching and tracing. Vouching tests for the existence or occurrence assertion by comparing journal entries to supporting source documents, ensuring that recorded transactions are legitimate and accurate. An example demonstrates how discrepancies like fictitious sales can be identified. Tracing, conversely, tests for the completeness assertion by starting with source documents and moving forward to the accounting records, ensuring that all actual transactions are documented. Both tests can concurrently assess accuracy or valuation, highlighting their importance in robust auditing practices.
00:00:00
In this part of the video, the speaker explains the concepts of testing for the existence (or occurrence) assertion versus the completeness assertion in auditing. They outline that audit testing involves comparing source documentation, such as invoices, purchase orders, and customer orders, to the accounting data, usually found in journal entries. Specifically, testing for existence or occurrence involves a process called vouching, where the auditor starts with the journal entries and matches them backward to the source documents. This backward matching can reveal discrepancies, such as fictitious sales or accidental recordings, as demonstrated with an example showing journal entries that do not correspond to any invoices.
00:03:00
In this part of the video, the speaker explains two auditing tests: vouching and tracing. Vouching is used to test the existence or occurrence assertion by starting with journal entries and checking supporting documents. Tracing, on the other hand, tests completeness by starting with source documents and following them to the accounting data. The crucial distinction is that vouching ensures that recorded transactions actually occurred, while tracing ensures all transactions are recorded. Additionally, the speaker mentions that accuracy or valuation can be tested concurrently with vouching and tracing.