AUD 3 Flashcards
What’s the difference between an audit and an examination?
In simple terms, an audit focuses on numbers, while an examination looks at processes and practices.
What is a recall of the TBS on communicating significant deficiencies?
It depends on if the audit is for a non-issuer/issuer, also if it is an integrated audit.
Some key things are the following about significant defciencies:
Always in writing
Always report to management and those charged with governanace
Always define sig def and material weakenesses in auditor’s report
Audit is never required to search for sig def in this case
Must communicate by 60 days of report release date
The report is restricted in use
What does footing and crossing mean in auditing very simply?
Footing: This involves adding up the columns of numbers at the bottom to ensure the totals are accurate. For example, if you have a list of expenses, footing would mean summing all the individual expenses to confirm the total matches what is recorded.
Cross-footing: This checks the accuracy of a report by adding the rows horizontally and comparing them to the totals. For instance, if you have totals for different categories, cross-footing would involve adding those row totals and comparing it to the overall total to ensure consistency.
This test the accuracy assertion
Which of the following best describes the nature of an audit performed in accordance with the Government Accountability Office (GAO) Government Auditing Standards?
Audit provides assurance for the following three things:
Entity’s compliance with laws and regulations
Effectiveness and efficiency of operations
Reliability of financial reporting
When reporting under Government Auditing Standards, the auditor should consider whether any noted deficiencies in such internal controls should be reported to who?
Specific legislative and regulatory bodies
The Accounting Principles Rule of the Code of Professional Conduct of the AICPA states that if the financial statements or data contain a GAAP departure, the departure may be justified if the CPA can demonstrate that due to unusual circumstances, such as what?
New legislation
Evolution of a new form of business transaction
When assessing management’s plans for dealing with the adverse effects of future conditions and events, mitigating factors would include four things:
The postponement of expenditures (including R&D);
Plans to dispose of assets;
Plans to borrow money or restructure debt;
Plans to increase ownership equity (sell stock).
Accounting estimates are not used to measure ________ _________. (Although, the measurement of some accounts may be uncertain pending the outcome of future events.)
future events
What is a bill of lading?
In short, a bill of lading is a critical document that shows proof of goods shipped, a binding contract for transportation, and proof of title and ownership. Understanding bills of lading is crucial for accurate accounting of inventory, expenses, and revenue, especially in businesses involved in international trade.
What management assertion would be tested by the following audit procedure: request positive confirmation directly from the customer of its balanced owed to the company?
Existence
What management assertion would be tested by the following audit procedure: test that the income statement agrees to the change of assets minus liabilities and owners’ equity?
Accuracy
What management assertion would be tested by the following audit procedure: test the aging in the A/R ledger?
valuation
What management assertion would be tested by the following audit procedure: trace shipping documents to the related sales invoices and orders, and to entries in the sales journal and A/R subsidiary ledger?
Cutoff/Completeness
How to calculate the sampling interval?
Tolerable Misstatement/Reliability Factor
How to calculate sample size?
Book Value of population/Sampling Interval
