A3 Flashcards
Internal control ONLY relevant to the entire entity, and NOT to any of it’s operating units or business functions. (T o F)
FALSE
Reviewing the client’s lawyer’s letter for information would assit and audit in determining whether management has identified all accounting ____________ that could be __________ to the financial statements
ESTIMATES; MATERIAL
Sample results must be projected to the population. Every 20th test is a (1/20= __) of the population. When projected onto population, it would equal number of overstatements divided by the percentage e.g $3,500/.05)
.05
An example of a disclaimer provided within a response to an auditor’s confirmation request would included language like, __________ is furnished as a matter of courtesy without a duty to do so and ….
INFORMATION
Reviewing ________ transactions reflected on the quarter-end Balance Sheet is not a procedure an auditor would perform to identify client contingencies
DERIVATIVE
Reperformance gives an auditor evidence regarding ___________ effectiveness
OPERATING
If an auditor unexpectedly discovers a high number of deviations, the auditor would increase ____________ risk of __________ misstatemnt
ASSESSED; MATERIAL
Mean per unit estimation formula = avg _______ value * number of items in a ___________
AUDITED; POPULATION
An inquiry to management regarding actual or potential litigation and the related assessment is classified as a ___________ procedure because it provides evidence regarding accruals and/or disclosures
SUBSTANTIVE
Selecting voucher packages that had been approved and matched the invoice, purchase order and receiving report is considered a __________
REPERFORMANCE
__________ Controls and policies and procedures that relate to many applications and support the effective functions and proper operation of the information system. This would ensure appropriate systems software acquisition
GENERAL
When an auditor is testing a client’s pension benefit obligation, one of the most appropriate was of making sure the FS are fairly stated is by getting an ____________ valuation from an outside firm
ACTUARIAL
When there is substantial doubt about an entity’s ability to continue as a going concern and every thing is properly disclosed, the auditor may issue a _________ of opinion
DISCLAIMER
the sample size used by an auditor has an inverse relationship with __________ misstatement
TOLERABLE
A file that has a high level of risk of data integrity is a file that has ________ inputs
MANUAL
Sampling Interval = ___________ Misstatement/ _________ factor
TOLERABLE; RELIABILITY
Sample size = Total __________ amount/ sampling _________
REPORTED; INTERVAL
Auditor scanning for large, significant or unusual transactions is an __________ procedure
ANALYTICAL
When an auditor finds a high number of deviations when performing procedures to sample test management’s review and approval of time sheets the auditor should __________ the assessed risk of ___________ misstatement
INCREASE; MATERIAL
Substantive audit procedures, during an integrated audit are required in a ________ __________ audit but not in the audit of _________ control
FINANCIAL STATEMENT; INTERNAL
An economy at the peak of the business cycle will be at the natural rate of ___________
EMPLOYMENT
Income statement account balances tend to be more predictable than accounts that only include __________ _________ accounts
BALANCE; SHEET
A likely benefit of information technology used for internal control will enhance _________ of information
TIMELINESS
An auditor should design tests of details such that __________ audit evidence support the planned level of assurance at the __________ assertion level
SUFFICIENT; RELEVANT
In assessing control risk, an auditor generally would select from a variety of techniques one of which being ____________
REPERFORMANCE
Return on Assets
NET INCOME/ AVERAGE TOTAL ASSETS
Auditor will most likely increase test of controls when a client’s IT system is extensively ___________ throughout the company’s accounting system
INTEGRATED
To detect overstatements of sales using test of details (existence assertions) the auditor would ________ transactions from the accounting records to the _________ documents
TRACE; SOURCE
To calculate tainting in sampling, divided the difference between the recorded amount and the amount ___________ by the __________ amount
AUDITED; RECORDED
Compensating balance agreements might signify ___________ ___________ transactions
RELATED PARTY
Business cycle:
PEAK, RECESSION, TROUGH, RECOVERY
An auditor might chose to not to test control related to certain assertions because the auditor believes evaluating the _____________ of the control is ____________
EFFECTIVENESS; INEFFICIENT
In testing assertions, _____________ is important in reviewing the collectability A/R
VALUATION
Monetary unit sampling is typically used as a ___________ test and would be suitable in a scenario where transactions are of ____________ amounts to give a higher likelihood of selecting __________ value items
SUBSTANTIVE; VARYING; HIGHER
Sampling method to allow selection of high value items and also used to test the existence of A/R
MONETARY UNIT SAMPLING
Human judgement in the decision making process is an example of a __________ limitation to and entity’s ___________ controL
INHERENT; INTERNAL
When an account has minimal activity during the year, the auditor most likely would use ________ of ________ in designing audit procedures
TEST; DETAILS
An advantage of statistical vs. nonstatistical sampling is that statistical sampling provides an objective basis for quantitatively evaluating sample risk (T o F)
True
The primary objective of data security controls is to ensure that storage media are only _________ with prior approval
ALTERED
Ratio estimation = _______ value of sample/ _______ value of sample) * Total book value
AUDITED; BOOK
Auditor observing the use of registers and tapes by employees provides evidence for __________
COMPLETENESS
A Walkthrough is following a transaction from it’s origination until it is reflected in the ____________ statements
FINANCIAL
performing an ___________ review procedure is an example of procedures used to test the completeness assertion
ANALYTICAL
As sample size increases, expected population ____________ rate increases (same in opposite direction) and simultaneously, __________ rate decreases (same in opposite direction)
An auditor will perform test of details if accounts being tested at interim are reasonably ______________
PREDICTED
Auditor should use _________ sampling when auditor expects error rates to be low
DISCOVERY
Material Weakness is when a potential misstatment may cause a _________ misstatement in the Financial Statements
MATERIAL
Significant Deficiency is when a deficiency is less ________ than a material weakness but important enough to merit attention by those charged with governance
SEVERE
Control Deficiency is when the design or operation of control doesn’t allow __________, ___________ or allow for ____________ in a timely manner
PREVENTION, DETECTION, CORRECTION
