Area 3 Performing Further Procedures and Obtaining Evidence Flashcards
Discovery Sampling
Discovery sampling is used when the auditor expects an extremely low error rate.
Sequential Sampling
When an auditor is planning a test of control and expects numerous errors in the application of the control then the sample size will need to be expanded through sequential, stop or go sampling–each step is conditional on the results of the previous steps.
Dual-Purpose Sampling
Dual purpose sampling is used to test attributes and variable simultaneously; usually when a low error rate is expected for the application of the control.
Variables Sampling
Variables sampling is concerned with the details of transactions and account balances (substantive tests) rather than a test of controls. Determines whether the amount in the account is reasonable or not.
What are Analytical Procedures?
Analytical procedures consist of evaluations of financial information made by a study of plausible relationships among both financial and non-financial data.
What is Check Kiting?
A kiting scheme involves drawing a check on one account to inflate the balance in another
Difference Estimation technique vs Ratio Estimation Technique VS MPU
Difference estimation takes the difference of the audit value and the book value divided by sample.
Ratio takes the audit value divided by the book value and multiplied by the population.
Mean per Unit MPU takes the audit balance divided by the sample population to get the MPU times the actual population size.
What is a Critical Audit Matter?
PCAOB — Public Company Audit Report
Critical Audit Matters are matters communicated or required to be communicated to the audit committee and that:
Relate to accounts or disclosures that are material to Financial Statements.
Involved especially challenging, subjective, or complex auditor judgment.
They are included in the auditor’s report and communicated to the audit committee.
Communication of CAMs is required. If no CAMs exist, include a statement stating no CAMs exist. Not a separate paragraph.
Required procedures for a review.
Review engagement, as per SSARs, provides limited assurance with regards to Financial Statements. A review is less in scope than an audit. The accountant is required to perform just inquiry and analytical procedures but is not required to perform any test of controls or substantive procedure.
What are the tests for Substantive Procedures?
TRACE
Trace(Vouch)
Reconcile
Analytical Procedures
Confirm (Inquire, Observe, Inspect, Re-perform)
Examine
Types of Analytics
Descriptive Analytics
Diagnostic Analytics
Predictive Analytics
Prescriptive Analytics
Data Analytics
Identifies trends in large amounts of data - Used for predictions & decision-making -Used to Identify Fraud - Used to Identify Patterns - Used in Sampling Big Data -Volume - Quantity of Data -Veracity - Quality or accuracy of data -Velocity - Speed at which data is obtained -Variety - Type of data being dealt with
Probability Proportionate to Size Sampling
Form of variable sampling
Does NOT use Standard Deviation
Focuses on dollar amount
Easier to use and design
Results in a smaller sample size to audit
SOC 1 vs SOC 2
SOC 1 A service organization’s internal controls related to financial information. Organization system and design of controls only. Includes a disclaimer of opinion on operating effectiveness of controls.
As a specified date.
SOC 2 All of SOC1 plus cloud and data. -information Technology- Organization system and design of controls and includes opinion on operating effectiveness of controls.
Over a period.
Reports on operating effectiveness
Assertions on Account Balances
Presentation & Disclosure
Existence
Rights & Obligations
Completeness
Valuations & Allocation
