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CPA Exam - AUD > Assessing Risk > Flashcards

Assessing Risk Flashcards

1
Q

Strategy/Considerations in Engagement Planning

A 
Analyze prelim Analytic procedures
Assess Risk (timing, nature, extent)
Objectives
Factors (HR)
Ident characteristics & scope (report type)
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2
Q

Prelim Engagement Planning (Program) Activities

A

QC & independence
Specialist
Document corrobative findings
Knowledge to accomplish objectives

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3
Q

Engagement Planning (Program)

A

Risk assessment & understanding entity enviroment

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4
Q

Engagement IC Elements (components)

A 
Monitoring
Risk Assessment
Control Enviro
Control activities
Info & communication
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5
Q

Audit documented at

A

Strategy
Program/plan
Changes

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6
Q

Materiality

A

amount missing/misstated influences decision

‘Big enough to matter’

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7
Q

Materiality documented

A

F/S
Acct balance (performance)
Revisions

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8
Q

Material Levels

A

General - Equity 1%, Assets 2%, N/I 5-10%
Performance - % set lower than General
Lower risk uncorrected misst

Tolerance - $ amount determined by Auditor
If found and diff is below Tolerance, F/S not impacted

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9
Q

Engagement Pre-Conditions

A

Determine if Frameowork acceptable

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10
Q

Rep Letter

A 
Date- Auditor's report
Fair- F/S, I/C, Assumptions
Immaterial errors
Litigation discl
Access
No Mgmt fraud
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11
Q

Engagement Letter

A 
Obj & Scope
Responsibilities - Mgmt & Auditor
Limitations- missing & misst
ID framework
Form & Content reference
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12
Q

Engagement docs requirements & considerations

A

Nature, timing & extent
Results & conclusions
Issues & evidence

Consider- Who performed & date
Who reviewed & date
Characteristics

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13
Q

Final Report Date workpaper issue

A

Workpapers not later than 60 days & maintain for 5 years

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14
Q

Dual Date Report

A

Responsible for specific events after fieldwork complete

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15
Q

Management Communication of audit

A

1) Overview- avoid details’
2) Address risks- Significant Def, Material Weekness, Substantive Risk
3) Opinion F/S- not effective I/C

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16
Q

Significant Deficiency
Material Weekness
Substantive Risk

A

I/C does not prevent/detect- correct misst
Control def- reasonable possibility of material misst
Intentional missapropriation- Audit cannot be performed

17
Q

Component Auditor’s requirements

A 
Independence 
Financial info
Findings/opinion
Signif risks
Related parties
Compliance if audit not restricted
18
Q

Firm QC

A 
Auditing, accounting & review svcs (meet prof standards)
Human res
Leadership
Relevant ethics
Accept & continue engagment
Performance
Monitoring
19
Q

Assess Risk Material Misstatement

A

*Determines level of Detection Risk&raquo_space; DR Determines nature, timing, extent

Identify
Magnitude
Relate
Consider liklihood of Material Misst

20
Q

Fraud Types

A

Missapropriation
IC Override
Fraudulent F/S

21
Q

Communication of Fraud

A

Govern- mgmt involved & material misst
Audit Comm- Disagree w/ Mgmt & Significant findings
1 Level Mgmt- Finding; No material misst
Outside Party- Subpheona
SEC client auditor change
Standards req
Auth communication w/ prior Auditor

22
Q

Entity Risk levels

A 
Internal- Governance
               Object/Strat
               Policies
               Finance struct
               Investment
                Nature ops

External- Industry & regulatory

23
Q

Substance over Form

A

Substance- analytics & test of details

Form- test of controls

24
Q

Internal Controls

A

process effected by Mgmt design that provide Reasonable Assurance about F/S, Ops & Compliance

25
Q

Risk Assessment process

A 
Inspect
Inquire
Observe
Confirm 
Analyze
Recalc
26
Q

Required & Not Required Procedures

A 
Not-  Tests of controls
          Search Signif Def
           Suitability to prevent, detect, correct
Req- Assess Control Risk below max
         Basis
          Understanding of I/C elements
27
Q

Svc Organizational Report (SOC)

A

Type 1- Effective Control > Discl of Opinion

Type 2- Expectation of Controls > Sys & Design , Ops effectivness

28
Q

IT Controls

A

General- IT sys parts

Application- IT sys tasks

29
Q

GAAS underlying principle

A

Materiality & Audit Risk

30
Q

Assess Risk

A

Nature
Timing
Extent

31
Q

Specialist

A

Objective & scope
Client relationships
understanding of Auditor’s use

32
Q

Analytical Proc Efficiency & Effectiveness factors

A

Nature
Plausibility & predictability
Availability & reliability
Precision

33
Q

Compensating control

A

Lessens severity of deficiencies (significant & material)

34
Q

Assessment of Control Risk

A

performed concurrently during audit w/ understanding of I/C

35
Q

Assessed level of RMM determines

A

Level of Detection Risk >
Determine Assessed Risk (nature, timing, extent) of Audit proc >
Detect Material Misstatement

36
Q

Incremental Audit Risk

A

Interim F/S- audit risk increases as time between tests and YE increases

CPA Exam - AUD (4 decks)

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