Audit 3 - Engagement Acceptance, Planning, & Risk Assessment

Question 1

Financial Statement Assertions

COVER U

Answer 1

Completeness
cutOff
Valuation, allocation, & accuracy
Existence & occurrence
Rights & obligations
Understandability & classification

Question 2

PCAOB Financial Statement Assertions

CEO APROVED

Answer 2

Completeness
Existence
Occurrence

Allocation
Presentation
Rights
Obligations
Valuation
E
Disclosure

Question 3

Audit Risk Model

Answer 3

Audit Risk = Risk of Material Misstatement x Detection Risk

RMM = Inherent Risk x Control Risk

Question 4

Assessing the Risks of Material Misstatement

IM A CPA

Answer 4

Internal Control - obtain an understanding
Material misstatement - assess the risk
Assessed level of risk response
Control testing
Perform substantive testing
Audit evidence - evaluate

Question 5

Components of Internal Control

CRIME

Answer 5

Control environment
Risk assessment
Information & communication systems
Monitoring
Existing control activities

Question 6

Control Activities in a Strong System of Internal Controls

PAID TIPS

Answer 6

Pre-numbering
Authorization of transactions
Independent checks to maintain asset accountability
Documentation

Timely & appropriate performance reviews
Information processing controls
Physical controls for safeguarding assets
Segregation of duties

Question 7

Audit Evidence Hierarchy

AEIOU

Answer 7

Auditor knowledge
External evidence
Internal evidence
Oral evidence
U know it