AUD Deck 3 Flashcards
What is the difference between test of controls and test of details?
the purpose of a test of controls is to evaluate the operating effectiveness of a control, whereas the purpose of a test of details is to support relevant assertions or to detect material misstatements
What is the difference between substantive analytical procedure and test of details?
when calculating and comparing a client’s ratios (analysis) to an industry average (norm), the auditor would be performing a substantive analytical procedure. test of details gather audit evidence to support specific account balances reported in the F/S
What type of indicator is average time for unemployment?
Lagging Indicator
What is lagging indicator?
It follows economic activity and provides signals after the fact
When do you use leading indicators?
when economists are trying to predict the length of business cycles
What are examples of leading indicators?
data for new unemployment claims, change in prices for materials, building permits for new home construction
(T/F) The auditor is required to understand classes of transactions in the entity’s operations
True - the auditor is required to understand significant classes of transactions and how they are processed
Which component of the COSO Internal-Control Integrated Framework is designed to ensure that internal controls continue to operate effectively?
Monitoring - monitoring of internal control effectiveness is done to provide an assessment of the performance of the system of internal control over time. Monitoring is designed to ensure that controls operate effectively.
What is attribute sampling?
used to test controls
How do you calculate the allowance for sampling risk?
the allowance for sampling risk is the excess of the upper deviation rate over the sample deviation rate
Upper Deviation rate
Less Sample Deviation Rate = samples lacking approval / total
=allowance for sampling risk
What is an inner join?
an inner join uses only the records that both data sets have in common
What is variable sampling?
variables sampling is used to estimate a numerical measurement of a population, such as the dollar value or the dollar value of errors in the population
What is discovery sampling?
a special case of sampling for “attributes” (errors) where the auditor’s initial estimate of error occurrence is zero or near zero - it does not sample for dollar value
What is attribute sampling?
sampling for errors (or some other attribute). The auditor determines whether the attribute appears or not, but does not try to estimate a numerical measurement of the population
What are scatter plots?
Scatter plots allow for the auditor to graphically show the relationship among variables. Scatter plots allow for regression lines to be added to show the direction and strength of correlation
