Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Becker AUD > A5 > Flashcards

A5 Flashcards

1
Q

Only area where auditor does not use judgment in sampling

A

*deciding which items will be selected

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Sampling Risk

A

*risk that the sample is not representative of the population and that the auditor’s conclusion will be different as a result

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Statistical vs. Nonstatistical Sampling

A

nonstatistical chooses sample size judgmentally

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Does statistical sampling eliminate the need for auditing judgment?

A

No

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Types of sampling

A

attribute sampling - I/C
variables sampling - substantive work

*attributes can usually be answered yes or no

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Sampling Risks in Substantive Testing

A
  1. Risk of Incorrect Acceptance (Beta) (Effectiveness)

2. Risk of Incorrect Rejection (Alpha) (Efficiency)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Sampling Risks in Tests of Controls

A
  1. Risk of Assessing Control Risk too Low (Beta) (Effectiveness)
  2. Risk of Assessing Control Risk too High (Alpha) (Efficiency)
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Beta risk is inversely related to

A

the confidence interval

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Types of nonsampling risk

A
  1. use inappropriate audit evidence

2. improperly evaluate the results

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What is used to determine whether or not a sample of internal controls can be accepted?

A

the UPPER DEVIATION RATE

= sample deviation rate + allowance for sampling risk

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Formula for upper deviation rate

A

= sample deviation rate + allowance for sampling risk

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Does population size have a large impact on sample size?

A

No

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

I/C: Inversely Related to Sample Size

A
  1. risk of assessing control risk too low

2. tolerable deviation rate

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

I/C: Directly Related to Sample Size

A
  1. expected deviation rate
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Is block (cluster) sampling allowed?

A

No

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

UDR <= TDR

A

accept

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

UDR > TDR

A

reject

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Discovery sampling

A

once you find one instance you reject

*used with fraud/critical items

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

When to use stratification

A
  • when a population has highly variable recorded amounts

* results in a reduced sample size

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Three Types of Sampling Plans

A
  1. mean-per-unit
  2. ratio estimation
  3. difference estimation
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

Mean-Per-Unit

A
  1. misstatement per item selected X population

2. 1 standard deviation X population

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

Ratio Estimation

A

audited amount / recorded amount X population recorded amount

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

Difference Estimation

A

recorded amount - audited amount / sample size X population size

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

What is a sampling unit?

A

*one account, dollar, etc.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

Direct Relationship for Sample Size for Substantive

A
  1. expected misstatement
  2. standard deviation
  3. assessed level of risk
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

Inverse Relationship for Sample Size for Substantive

A
  1. tolerable misstatement

2. acceptable level of risk

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

Advantages of PPS (MUS)

A
  1. automatically emphasizes larger items by automatically stratifying the sample
  2. generally requires a smaller sample when no errors are expected
28
Q

Disadvantages of PPS (MUS)

A
  1. special procedures for zero balances, negative balances, and understated balances
29
Q

PPS Sample Size Determination

A

Sampling Interval: Tolerable misstatement/reliability factor

Sample size: recorded amount of population/sampling interval

30
Q

Do internal control problems mean that there are necessarily possible misstatements?

A

No

31
Q

Do ISAs define the term material weakness?

A

No

32
Q

How must communication of control deficiencies be communicated?

A

in writing, even if corrected

33
Q

What should an auditor do about previously existing deficiencies?

A

tell the client again (remind them)

34
Q

When must communication about control deficiencies be communicated?

A

Preferred: report release date
Required: release date + 60 days

35
Q

Does communication to management about control deficiencies need to be restricted?

A

Yes

36
Q

May an auditor report that there were no significant deficiencies?

A

No

37
Q

May an auditor issue communication that there were no material deficiencies identified?

A

Yes

38
Q

What unique items are in written communication about internal controls?

A
  • disclaimer of opinion
  • describe the terms
  • restrict use
39
Q

Do PCAOB standards apply to nonissuers, even if they are having an opinion for their internal controls?

A

No

40
Q

Written representation for internal controls is part of a possible _____ limitation

A

scope

41
Q

Is fraud risk assessment part of the audit of internal controls?

A

Yes

42
Q

How to test controls when issuing an opinion on the controls?

A
  • evaluate the design effectiveness

* evaluate the operating effectiveness

43
Q

Can you use the work of others during an audit of internal controls?

A

Yes, so long as they are not in high-risk areas

44
Q

In order to examine a nonissuer’s internal controls, what condition must already be set in place?

A

the auditor must also have audited the accompanying financial statements

45
Q

What is benchmarking of automated controls?

A

*if the automated controls have not changed from one year to the next, the auditor may not need to repeat specific testing performed; just needs to verify that the control has not changed

46
Q

Are controls evaluated for a period or as of?

A

As of the balance sheet date

47
Q

When should communication be made for significant and material weaknesses?

A

by the report date

48
Q

When should communication be made for control deficiencies (not material or significant)?

A

within 60 days of the report release date

49
Q

Which types of deficiencies must be communicated in writing?

A

all of them

50
Q

Unique aspect in separate report for internal controls

A

*inherent limitations paragraph

51
Q

When auditing internal controls, the auditor can opine on either:

A
  1. the direct internal control
    or
  2. management’s assertion
52
Q

Types of reports for internal controls and financial statements

A
  1. combined report

2. two separate reports

53
Q

When a material weakness exists, what should the auditor express an opinion on

A

*the internal control, NOT management’s assertion

54
Q

Is reporting on whether a previously reported internal control weakness continues to exist required?

A

it is not required; it would be a voluntary engagement

55
Q

Even in a disclaimer of opinion, an auditor should still mention:

A

*material weaknesses identified

56
Q

Can an auditor use the work of another auditor in conducting an audit of internal controls?

A

Private: yes
Public: no

57
Q

Would an examination be sufficient to see if an entity is in compliance with the Foreign Corrupt Practices Act (FCPA)?

A

No

58
Q

Communication of control deficiencies: financial statement audit vs I/C audit

A

F/S audit: within 60 days

audit I/C: by the report release date

59
Q

How often must an auditor meet with the audit committee with management being present?

A

at least once per year

60
Q

What should the auditor communicate to those charged with governance?

A
  • overview of the planned scope and timing of the audit

* significant audit findings

61
Q

What special considerations should be taken if those charged with governance are not involved with managing the entity?

A

*auditor should discuss material, corrected misstatements brought to management’s attention as a result of the audit

62
Q

Should communication to those charged with governance be restricted in use?

A

Yes

63
Q

Form of communication with those charged with governance

A

must be in writing

64
Q

For audits of issuers, when must communications with those charged with governance happen?

A

before the audit report release date

65
Q

When must management’s representation letter be dated?

A

the same date as the auditor’s report

ISA allows it to be close to

66
Q

What is the final piece of evidential matter?

A

the management representation letter

67
Q

Contents of the management representation letter

A
  1. financial statements
  2. completeness of information
  3. fraud (I/C)
  4. laws and regulations
  5. uncorrected misstatements
  6. litigation and claims
  7. estimates
  8. related party transactions
  9. subsequent events
  10. additional representations (specific to F/S)

Becker AUD (6 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions