A3 Flashcards
If an auditor’s risk assessment is based on the effective operation of controls, the auditor will likely
Identify specific IC that are likely to detect or prevent material misstatements.
Auditors would consider situations that threaten financial stability or profitability, since such situations might provide an inventive to fraudulently misstate the FS. example is
The entity’s industry is experiencing declining customer demand
What type of analysis provides direct and quantitative measures of the precision of expectation… it is also an advances statistical technique that often uses software?
Regression analysis
Sampling used to estimate NUMERICAL measurements of a population
Variable Sampling
Detection Risk
can be changed at the auditor’s discretion
Control Risk & Inherit Risk
Exist independently of the FS Audit
When determining sample size of TOC auditor should consider
Rate of Deviation, Allowable risk of assessing risk to low & Tolerable Deviation Rate
Auditor’s risk assessment
Affects the nature, timing and extent of Audit procedures NOT the relevance of AUDIT Evidence
Existence Assertion auditor works from…
Accounting records to supporting evidence.
encontre algo al auditar pero solo se si existe si busco evidencia
Completes Assertion auditor works from…
Supporting Evidence to Acct Records
Como se que la evidencia esta completa? la busco en los records
When control risk is assessed @ maximum level
Document Assessment
Auditor after documenting should make decisions to potentially perform + substantive testing
Audit eveidence
The + effective IC structure, the + assurance it provides about the reliability of the accounting data and FS
TOC example
Auditor interviews & observes appropriate personnel to determine segregation of Duties
Auditor assesses control risk b/c?
Affects the level of detection risk that the auditor may accept.
Primary objective of brainstorming is….
Assess the potential for material misstatement due to fraud
Inherent Risk- auditor assesses which
Susceptibility of FS assertion to be materially misstated assuming there are no related controls.
if acceptable level of detection risk increases auditor may change
Timing of substantive test from YE to INT.
As detection risk increase substantive decreases so by moving it from YE to INT=The assurance decreases
Which ratio would an engagement partner most likely consider i the overall review stage of an audit?
Inventory Turnover=
COGS/avg. Inventory
Precision (sampling results)
Auditors evaluation of sampling results by calculating the possible error in either direction
Primary objective of probability proportional to size
To identify overstatement of error.
TOC in issuer client
An auditor must obtain evidence that the controls are operating effectively during the entire period of reliance if the auditor plans to assess Control Risk at LESS than the Maximum.
Providing + supervision during audit in response to assessed risk of RMM is example of
An overall response
Auditor’s analytical procedures most likely would be facilitated if entity…
Uses standard cost system that produces variance reports…
The report caparison of budget will already be performed y es probable que management ya los analyso previamente y tiene respuestas para los cambios
Primary objective of analytics @ review (final) stage is to….
Assist the auditor in evaluating the overall FS presentation.
Primary objective of the FRAUD brainstorming
Assess the potential for material misstatement due to FRAUD
Acordarme si hablamos de FRAUD entonces el assessment es de FRAUD
Response to an increase in risk of RMM in inventory will be to
Perform physical count on the last day of the current year
When auditor assesses control risk too HIGHT ….most likely occurred because
Control risk based on the auditor’s sample is greater than the true operating effectiveness of the client’s control activity
Auditor would consider confirming a LARGE complex sale when…
RMM (inherent risk & control risk) is HIGH
PCAOB standards state that the following is not of relevance regarding audit evidence
Audit Risk assessment
