A3 and A4

Question 1

`what is a trough of a business cycle

Answer 1

it is an economic low point with no positive indicators for the future.

Question 2

business Cycle

Answer 2

Expansion -> peak -> contraction -> trough -> recovery

Question 3

what is included in a walkthrough procedures

Answer 3

observations, inquiries, inspection of relevant documentation, and reperformance of controls

Question 4

what is substantive testing

Answer 4

actually testing for accuracy and doing the dirty work (dollar amount testing)
veryfing accuracy of FS

Question 5

what is test of controls

Answer 5

testing for efficiency, to see if controls are in place. a broad overview almost

Question 6

Observation

Answer 6

when an auditor looks at a process or procedure performed by others
observing a person

Question 7

Confirmation

Answer 7

specific type of inquiry that involves obtaining representation from independent third parties about account balances, transactions or events

Question 8

Reperformance

Answer 8

auditor independently performs procedures or controls that were orginally preformed as part of hte entity’s internal contrls

Question 9

inspection/examination

Answer 9

involves examining records or documents.
inspecting a thing

Question 10

when are analytic procedures required?

Answer 10

planning and review

Question 11

Vouching

Answer 11

testing for existence
testing for support
Bigger to smaller.
Start with FS go down to source documents
worried about overstatement
(starts iwth big to small, over statement)

Question 12

Tracing

Answer 12

testing for completeness
testing for coverage
smaller to bigger
start with source documents then go up to FS
worried about understatement (exp , liabilities)
(small to big , understatement)

Question 13

existence

Answer 13

records to source

Question 14

compelteness

Answer 14

sources to records

Question 15

directional testing

Answer 15

Going down is Vouching (Existence)
FS
trial balance
general ledger
sub ledger
book of og entry
source documents
execution of event
transaction approved
Going up is tracing (completeness)

Question 16

what relationship does risk of assessing control risk too low have with sample size

Answer 16

inverse

Question 17

what relationship does tolerable deviation rate have with sample size

Answer 17

inverse

Question 18

what relationship does expected deviation rate have with sample size

Answer 18

direct

Question 18

what risks are related to the efficiency of an audit?

Answer 18

risk of incorrect rejection and risk of assessing control risk too high

Question 18

what is deviation rate

Answer 18

in a sample, it is the auditors best estimate of the deviation rate in the population

Question 18

what risks are related to the effectiveness of an audit

Answer 18

risk of incorrect acceptance and risk of assessing control risk too low

Question 18

variables sample and PPS sampling

Answer 18

typically used in substantive testing of account balances. dollar values

Question 18

what is upper deviation rate

Answer 18

sample deviation rate + allowance for sampling risk

Question 19

when should auditor reduce reliance on controls (aka higher risk)

Answer 19

when upper deviation rate is greater than tolerable rate.

Question 19

attribute testing

Answer 19

deals with test of controls, often can be answered in a yes or no form

Question 19

when do you NOT project a error for PPS samples

Answer 19

when the book value is greater than the sample interval value.

Question 19

Descriptive analytics

Answer 19

what happened, what is happening ot the data. least complex

Question 19

diagonstic analytics

Answer 19

the why. underestanding the underlying cause of results

Question 20

predictive analytics

Answer 20

use historic data to make predictions about future events

Question 21

prescriptive analytics

Answer 21

most advanced.
how to make something happen

Question 22

what d