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AUD > A3 and A4 > Flashcards

A3 and A4 Flashcards

1
Q

`what is a trough of a business cycle

A

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

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2
Q

business Cycle

A

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

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3
Q

what is included in a walkthrough procedures

A

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

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4
Q

what is substantive testing

A

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

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5
Q

what is test of controls

A

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

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6
Q

Observation

A

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

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7
Q

Confirmation

A

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

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8
Q

Reperformance

A

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

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9
Q

inspection/examination

A

involves examining records or documents.
inspecting a thing

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10
Q

when are analytic procedures required?

A

planning and review

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11
Q

Vouching

A

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)

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12
Q

Tracing

A

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)

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13
Q

existence

A

records to source

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14
Q

compelteness

A

sources to records

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15
Q

directional testing

A

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)

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16
Q

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

A

inverse

17
Q

what relationship does tolerable deviation rate have with sample size

A

inverse

18
Q

what relationship does expected deviation rate have with sample size

A

direct

19
Q

what risks are related to the efficiency of an audit?

A

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

20
Q

what is deviation rate

A

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

21
Q

what risks are related to the effectiveness of an audit

A

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

22
Q

what is tolerable deviation rate

A

maximum rate of error the auditor can accept

23
Q

variables sample and PPS sampling

A

typically used in substantive testing of account balances. dollar values

24
Q

Expected deviation rate

A

auditors estimated error rate (before Sampling)

25
Q

what is upper deviation rate

A

sample deviation rate + allowance for sampling risk
this number is the highest an auditor can estimate of error

26
Q

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

A

when upper deviation rate is greater than tolerable rate.
bc if the number we expect is higher than the number we can accept, we cant rely on contrls

27
Q

attribute testing

A

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

28
Q

when do you NOT project a error for PPS samples

A

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

29
Q

Descriptive analytics

A

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

30
Q

diagonstic analytics

A

the why. underestanding the underlying cause of results

31
Q

predictive analytics

A

use historic data to make predictions about future events

32
Q

prescriptive analytics

A

most advanced.
how to make something happen

AUD (7 decks)

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