Aud 1 Flashcards
The engagement letter for compilation of unaudited finanical stmnts will include
objective of the the compilation:
- -no opinion or form of assurance
- -acknowledgement of mngmnts representation
- -not used by 3rd parties
Ratio estimation sampling technique is most effective, when
the calculated audit amounts approximately proportional to the client’s book amounts
Overall responses to address the assessed risk of material misstatements include the following:
- -emphasizing to the audit team the need to maintain professional skepticism
- -Assigning more experienced staff
- -Providing more supervision
- -Incorporating more elements of unpredictability
- -Making general changes to the nature, timing or extent of the audit procedures
Risk assessment procedures include;
- -Inquiries of management and other within the entity
- -Analytical procedures, and
- -observation and inspection
- -as well as, other procedures to obtain other helpful information
The purpose of an embedded audit module is to :
enable continuous monitoring and analysis of transaction processing
When an accountant issues to an underwriter a comfort letter with comments on data that has not been audited:
the underwriter most likely will receive negative assurance on the capsule information.
Stmnts on Standards for Attestation Engagements (SSAE) are:
–Practitioners engaged to perform exam or review or issue an agreed-upon procedure report on a matter, or an assertion about the matter of another party.
the first section of an audit report for an issuer is:
–Opinion on the Financial Stmnts.
If internal controls are effective, should the auditor perform substantive procedures?
yes, because effective internal controls reduce the risk, but do not eliminate the needs for substantive testing.
When testing the operation effectiveness of internal controls, the auditor should use:
inquiry with other procedures to obtain sufficient appropriate evidence about the effectiveness of relevant controls
A compilation should include a statement that:
the auditor does not express an opinion on the financial statements.
The only time an auditor makes reference to a specialists work is when:
if the reference to the specialist’s work clarifies the emphasis-of-matter paragraph of the audit report
when assessing the competence of the internal auditor, and independent CPA should obtain information about the:
quality of the internal auditors’ working-paper documentation
a cash basis report title should be:
Statement of revenues collected and expenses paid.
When testing journal entries, the auditor should focus on:
–journal entries made at the end of the reporting period, and
–journal entries made during the reporting period.
What is the objective of an audit of internal control?
The objective of an audit of internal control is to express an opinion on the effectiveness of the internal controls over financial reporting.
What is the inventory turnover ratio?
Cost of good sold / average inventory
What it the accounts receivable turnover ratio?
net credit sales / average receivables
What is the total asset turnover ratio?
net sales / average total assets
Which type of sampling allows the auditor to quantify sampling risk?
Sampling risk can be quantified by using attribute sampling.
