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Audit > Assessing & Developing A Planned Response > Flashcards

Assessing & Developing A Planned Response Flashcards

1
Q

What does the “Nature” of the audit refer to?

A

Type

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2
Q

What part of NET is this conveying?
Perform a specified procedure….

A

Nature

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3
Q

What part of NET is this conveying?
On a specified number of records from the population

A

Extent

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4
Q

What part of NET is this conveying?
As of interim date

A

Timing

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5
Q

What does the “Extent” of the audit refer to?

A

Scope

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6
Q

What does the “Timing” of the audit refer to?

A

When

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7
Q

What further audit procedure would be necessary?
Auditor’s risk assessment is based on operating effectiveness of internal controls?

A

TOC

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8
Q

What further audit procedure would be necessary?
Substantive procedures alone are insufficient

A

TOC

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9
Q

What procedures are required to detect material misstatements?

A

Substantive procedures

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10
Q

Why are substantive procedures required?

A

Inherent limitations to internal controls

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11
Q

What is the amount set by the auditor at less than materiality for the financial statements as a whole

A

Performance Materiality

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12
Q

What does performance materiality decide?

A

NET

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13
Q

What is the maximum error in a population that the auditor is willing to accept?

A

Tolerable misstatement

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14
Q

How does tolerable misstatement relate to performance materiality?

A

TM is application of PM in a sampling procedure

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15
Q

What is the C in CRIME?

A

Control Environment

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16
Q

What is the R is CRIME?

A

Risk Assessment

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17
Q

What is the I in CRIME?

A

Information and communication system

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18
Q

What is the M in CRIME?

A

Monitoring

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19
Q

What is the E in CRIME?

A

Existing controls

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20
Q

What component of internal control?
Setting the tone of the organization

A

Control environment

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21
Q

What component of internal control?
Identification by management of the risks relevant to the preparation of the FS

A

Risk assessment

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22
Q

What component of internal control?
Methods used to classify and report transactions and communicate roles and responsibilities

A

Information

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23
Q

What component of internal control?
Procedures established to assess the quality of IC over time

A

Monitoring

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24
Q

What component of internal control?
Policies and procedures established to ensure that management objectives are carried out

A

Existing controls

25
Q

As the acceptable level of DR decreases, the assurance provided from substantive tests should _______

A

increase

26
Q

RMM Formula

A

IR * CR

27
Q

AR Formula

A

RMM * DR

28
Q

Sample deviation rate

A

Number of errors / Sample Size

29
Q

Upper deviation rate

A

Sample deviation + Allowance

30
Q

Point estimate

A

Sample error + recorded balance

31
Q

PPS Sampling
Sampling interval

A

Tolerable misstatement/reliability factor

32
Q

Analytic procedures are required during the _______ and _____ phase

A

planning, final review

33
Q

Working capital

A

current assets - current liabilities

34
Q

Current ratio

A

Current assets/Current liabilities

35
Q

Quick ratio

A

current assets (not inventory)/current liabilites

36
Q

liquidity ratio

A

short term ability to pay cash

37
Q

Activity ratio

A

how effectively an enterprise is using assets

38
Q

AR turnover

A

Net Sales/ Average AR

39
Q

Days sales in AR

A

Ending AR/ (Sales/365)

40
Q

Inventory turnover

A

COGS/ Average inventory

41
Q

Days in inventory

A

Ending inventory/(COGS/365)

42
Q

Operating cycle

A

days sales in AR + Days in inventory

43
Q

Working capital turnover

A

Sales/ Average Working Capital

44
Q

Asset turnover

A

Sales/ Average total assets

45
Q

What ratio indicates number of days between the acquisition of inventory and the realization of cash from selling the inventory

A

operating cycle

46
Q

Profitability ratio

A

success or failure

47
Q

Net profit margin

A

Net income/Net Sales

48
Q

Net operating margin

A

Net operating income/Net Sales

49
Q

Gross profit margin

A

Net sales - COGS/ Net sales

50
Q

Return on asset

A

Net income/Average total assets

51
Q

Debt to equity

A

Total liabilities/Total equity

52
Q

Total Debt ratio

A

Total liabilities/Total assets

53
Q

When would positive confirms be used? ______, _______, ______

A

Large receivables, higher risk, weak IC

54
Q

Positive confirms require the customer to respond?
T/F

A

True

55
Q

Negative confirms require the customer to respond?
T/F

A

False

56
Q

Kiting

A

Check drawn on one bank account is deposited in another and no record of first disbursement is made

57
Q

Lapping

A

today’s cash covers yesterday’s theft

58
Q

Unqualified opinion

A

Issuer

59
Q

Unmodified opinion

A

Nonissuer

Audit (7 decks)

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