Audit Deck 2 Flashcards
An auditor assesses ______ risk because it affects the level of detection risk and helps determine the risk of material misstatement.
Control Risk
*Why does using computers in auditing affect the method used to review staff work?
The calculations that the software used to get to the conclusions may not be readily available. You may have to go find the calculations in the software.
An auditor considers the tolerable deviation rate, the allowable risk of assessing control risk too low, and the expected deviation rate when they are determining WHAT for a test of controls?
The Sample Size
The auditor’s BEST estimate of the deviation rate before actually performing testing is called?
The EXPECTED deviation rate
What assertion is the auditor checking when they review the reports of error from customers who management sent monthly statements?
Rights and Obligations. Errors reported by customers could indicate that the company doesn’t have the right to collect
Tests to collect evidence that balances, disclosures, and transactions related to the Financial Statements are correct are called tests of ______?
Tests of DETAILS
Why would you use a test of details as a test of controls?
To see if controls are operating effectively
(Cash + A/R + Marketable Securities) / Current Liabilities = _______
Quick Ratio
An auditor states that the audit was conducted in accordance with PCAOB standards in WHAT section of the Audit Report?
The Basis for Opinion Section
Comparing current year payroll expenses to prior year payroll expenses is a(n) ___________ review procedure most likely used when reviewing costs and expenses.
ANALYTICAL review
What procedures would an auditor perform to gain evidence to form an opinion on the effectiveness of internal controls in an integrated audit of a nonissuer?
Review the misstatements detected and tests of controls performed during financial statement audit, as well as review reports issued during year by internal audit department
In an integrated audit of internal control, what opinion should an auditor issue if there is a material weakness in internal control?
Adverse Opinion
Consulting services, advocacy services, and return preparation are SPECIFICALLY excluded in _________ engagements.
Attest
What should an auditor’s opinion state if inadequate disclosures have a material but not pervasive effect on the financial statements?
“In our opinion, except for the omission of the information described in the basis for qualified opinion section of our report…”
What consists of these 6 elements?
- Leadership Responsibilities (Tone at the Top)
- Ethical Requirements
- Acceptance and continuance of clients
- Human Resources
- Engagement Performance
- Monitoring (ongoing quality control efforts)
QUALITY CONTROL SYSTEM for a CPA firm
What single form helps you confirm both cash balances on deposit at the bank and collateral pledged on loans originating from the bank? (Two confirmations - One Form)
Standard AICPA BANK CONFIRMATION
An _______ test facility is a computer-assisted auditing technique that runs both real and fake data without the client knowing.
INTEGRATED Test Facility
What evidence proves that a sale occured?
Shipping Documents
(T/F) An auditor is required to have audited a client’s financial statements and issued an unmodified or qualified opinion in order to issue a report on the client’s compliance with contractual agreements or regulatory requirements in connection to a financial statement audit.
True
Risk of material noncompliance and risk of material misstatement are both inversely related to:
Detection Risk
A ___ _____ _____ Single audit report is a Single Audit expanded to include procedures designed to test and report on compliance matters having a direct and material effect on major federal award programs.
2 CFR 200 single audit report
These factors should be considered when assigning what?
1. Engagement Size and Complexity
2. Personnel Availability
3. Special Expertise required
4. Timing of the work to be performed
5. Continuity and periodic rotation of personnel
6. Opportunities for on-the-job training
Personnel to an Engagement
“An audit includes evaluating the reasonableness of significant accounting estimates made by management” is a _____ element of the auditor’s report under U.S. auditing Standards.
BASIC element
The definition “A nonfederal entity that expends federal awards received from another entity to carry out a federal program” is defining what?
A sub-recipient
Typically the agency that provides the most amount of direct funding to a nonfederal entity is called a WHAT agency? (Government Auditing)
Cognizant Agency
Does an auditor express an opinion on the effectiveness of internal control over compliance in a COMPLIANCE AUDIT?
NO
A disbursement recorded in one accounting period with the receipt occurring in the subsequent period is called a WHAT in transit?
DEPOSIT in transit
What is an audit procedure used to test the understandability of the presentation and classification of financial statements with respect to inventory?
Confirming inventories pledged under loan agreements, because those should be properly disclosed in the financial statements
An auditor who performs work on the financial information of a component that will be used as audit evidence for the group audit is called a:
Component Auditor
An auditor auditing an entity with multiple components or subsidiaries is a WHAT auditor?
GROUP auditor
These are the five components of?
1. Control Environment
2. Monitoring
3. Information and Communication Systems
4. Risk Assessment
5. Control Activities
INTERNAL CONTROL
What is the most likely substantive procedure to audit Payroll?
Comparing payroll to entity standards or budgets (this is an analytical procedure)
The auditor refers to the use of GAAP in which section of the audit report?
The OPINION Section
