Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

AUD Test > Audit 4 > Flashcards

Audit 4 Flashcards

1
Q

Audit evidence =

A

Support for audit opinion

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Hierarchy of audit evidence

A 
"AEIO U-know it!"
Auditor's direct personal knowledge and observation
External evidence
Internal evidence
Oral evidence
U-know it!
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Vouching

A

Test for: Existence/occurrence
Looking for: Support
Risk: overstatement of things such as revenue and assets
“From land of accounting records to land of reality”

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Tracing

A

Test for: Completeness
Looking for: Coverage
Risk: Understatement of things such as liabilities and expenses
“From land of reality to land of accounting records”

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Positive vs. Negative confirm

A 
Positive = ask party to agree or disagree and send response
Negative = ask party only to respond if they disagree
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Standard auditing procedures

A 
"FIVE CARROT CARS"
Footing, cross-footing, and recalculation
Inquiry
Vouching
Examination/ inspection
Confirmation
Analytical procedures
Re-performance
Reconciliation
Observation
Tracing
Cutoff review
Auditing related accounts simultaneously
Representation letter
Subsequent events review
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Auditing procedures to test Completeness

A
  1. Tracing
  2. Analytical review
  3. Observation
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Auditing procedures to test Valuation, Allocation, and Accuracy

A
  1. Inspection of documentation
  2. Footing and cross-footing
  3. Recalculation
  4. Reconciliation
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Auditing procedures to test Cutoff

A
  1. Cutoff procedures
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Auditing procedures to test Existence and Occurence

A
  1. Confirmation
  2. Observation, inspection, and examination
  3. Vouching
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Auditing procedures to test Rights and Obligations

A
  1. Inspection of documentation
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Auditing procedures to test Understandability and Classification

A
  1. Inspection of documentation
  2. Review of disclosures
  3. Inquiry of management
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What’s the first thing the person opening the mail should do when they receive a check?

A 
Make copies of it!
With copies sent to:
1. Cashier
2. AR dept.
3. Accounting dept.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Positive confirmations should be used when…

A
  1. large $ amounts
  2. expect errors/ disputes
  3. weak internal controls
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Negative confirmations can be used if…

A
  1. low risk
  2. small balances
  3. expect the customers to pay attention
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

What is lapping? What is the best way to prevent it? To detect it?

A

Lapping is using today’s cash receipts to cover yesterday’s theft.
Prevent: Lock box system (don’t give them assess in the first place)
Detect: compare dollar amounts and dates on bank deposit slips with customer remittance credits recorded in AR ledger

17
Q

What is kiting? How do you detect it?

A

Kiting is when you have cash recorded at two places at once. Write a check from one bank account (don’t record disbursement), but record the deposit.
Detect: bank transfer schedule- receiving bank receives before sending bank disburses

18
Q

What are some clues that an asset may not exist?

A
  1. Company does not/ cannot insure the asset
  2. The company doesn’t pay taxes on it
  3. If you tour the plant/ inquire and it’s not there
19
Q

How to determine the existence of Related Parties

A
  1. Evaluate controls for authorization/approval of related party transactions
  2. Ask for names of related parties
  3. Review entity’s SEC filings
  4. Review material transactions
  5. Review PY audit documentation
20
Q

Clues that indicate a possible related party transaction

A
  1. Compensating balance agreements
  2. Loan guarantees
  3. Unusual, nonrecurring transactions near year-end
  4. Transactions based on terms that differ significantly from market terms
  5. Non-monetary exchanges
21
Q

Ways to identify contingent liabilities

A
  1. review the minutes
  2. invoices from lawyers
  3. correspondence with taxing authorities
  4. bank confirms
  5. long-term leases
  6. client rep letter
  7. inquiry of lawyer
22
Q

What is “clearly trivial”?

A

It does NOT equal not material
It is: inconsequential (individually and aggregated) when judged by any criteria of size, nature, or circumstance

Trick: if you’re not sure, then it’s not trivial!

23
Q

When would a significant engagement deficiency exist?

A
  1. failed to obtain sufficient appropriate evidence
  2. reached an inappropriate overall conclusion
  3. report is not appropriate for the circumstances
  4. firm is not independent of the client

AUD Test (7 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2025 Bold Learning Solutions. Terms and Conditions