Assessing & responding to RMM due to error or fraud Part 2 Flashcards

1
Q

if I/C appears to be adequate and relevant, auditors may perform…

A

tests of controls

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

what is an error?

A

unintentional misstatement

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

what is fraud?

A

intentional misstatement

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

what are analytical procedures?

A

evaluations of financial information though analysis of plausible relationships among both financial and non-financial data

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

materiality is the threshold used by auditors to determine…

A

which items need to be investigated further

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

performing more audit procedures means…

A

decrease materiality threshold in response to increased RMM

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

high control deviation rate =…?

A

decrease reliance on controls, increase RMM

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

tolerable deviation rate

A

the maximum rate of deviations from a control that an auditor will accept before concluding the control is ineffective

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

tolerable deviation rate is calculated before…

A

performing tests of controls and are unlikely to be increased after testing

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

when are misstatements detected?

A

during substantive procedures

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

accountant may not issue a review without having..

A

received a signed letter of representation from management

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

what are the two required times to use analytical procedures?

A

risk assessment (planning) and overall review

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

what is the purpose of risk assessment

A
  1. enhance understanding of entity
  2. identify high risk accounts/assertions
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

what is the purpose of overall review?

A
  1. confirm that financial statements are consistent with overall understanding of the entity
  2. ensure all unexpected amounts/relationships have been explained
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

when it an optional time to use analytical procedures?

A

substantive tests (used to verify reasonableness of accounts/assertions)

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

requirements of examination

A

-provide reasonable assurance
-obtain sufficient appropriate evidence
-express opinion in written report

17
Q

risk acceptance

A

continuing to perform audits without making any changes or taking additional precautions

18
Q

risk avoidance

A

no longer perform audits

19
Q

risk sharing

A

obtaining additional insurance so that insurance company shares any risk (performing joint audit with another firm)

20
Q

risk mitigation

A

actions which lower or reduce/mitigate the risk of poor performance

21
Q

what engagement can be reviewed and what is the standard?

A

annual F/S SSARS
single F/S SSARS
pro forma F/S SSAE
interim F/S (nonissuer) SAS/SSARS

22
Q

what engagement can NOT be reviewed

A

Prospective F/S (projection or forecast)
I/C
compliance (laws, contracts)

23
Q

testifying as an expert witness is considered consulting governed by..

A

Statement on Standards for Consulting Services

24
Q

two types of substantive procedure

A

analytical procedures
tests of details

25
Q

analytical procedures consist of…

A
  1. trend analysis
  2. ratio assesssment
  3. information comparison
  4. estimate analysis
26
Q

tests of details consists of…

A
  1. bank confirmation
  2. invoice matching
  3. physical inventory observation
  4. management-targeted inquiries
27
Q

what are the components of the fraud risk management program?

A
  1. establishes governance policies
  2. conduct a comprehensive risk assessment
  3. plan and execute preventative and detective control processes
  4. perform timely and confidential investigations
  5. monitor and assess the program, reporting the results and improving the processes
28
Q

what are the reasons to test controls?

A
  1. lowers assessed RMM
  2. more efficient than substantive (extensive) testing
  3. reduce amount of substantive testing
  4. substantive tests cant provide audit evidence
  5. controls appear to be reliable/are well designed
  6. relevant to management assertions
  7. required for all issuer and nonissuer integrated audits
29
Q

what are the CRAFT analytical comparisons?

A

Client vs industry
Related accounts
Actual vs budget
Financial vs nonfinaancial
This year vs last year

30
Q

what is the incremental audit risk?

A

the risk of misstatements between interim period and year end