Audit Deck 5

Question 1

Sending confirmations to customers during an audit of accounts receivable helps to test WHAT assertion?

Answer 1

The EXISTENCE assertion

Question 2

In a physical inventory account, the auditor inspects the inventory to verify the ______ and condition

Answer 2

EXISTENCE

Question 3

When it comes to audit documentation, an auditor is required to document findings that could result in a _________ to the auditor’s report.

Answer 3

MODIFICATION

Question 4

What kind of chart is the BEST type for visualization when performing a TREND analysis?

Answer 4

Line Chart (they appropriately address the forward-moving concept of time)

Question 5

___________ is the process that assesses the quality of internal control performance over time.

Answer 5

Monitoring

Question 6

In determining the number of sample items, the auditor considers the tolerable rate of deviation from control activity and the ______ ______ rate of deviations.

Answer 6

Likely Rate

Question 7

What are pro forma financial statements?

Answer 7

“Financial statements forecasted for future periods”

Question 8

Basically, financial FORECASTS are ____-term, and financial PROJECTIONS are ______-term.

Answer 8

Short-term (forecast)
Long-term (projection)

Question 9

(T/F) A financial projection is appropriate for general use.

Answer 9

FALSE

Question 10

(T/F) A financial forecast is appropriate for general use.

Answer 10

TRUE

Question 11

The auditor’s report should be addressed to the entity that _______ them.

Answer 11

Engaged

Question 12

GAAP specifies that in order to qualify for hedge treatment, they must disclose a number of things, including _____ ________.

Answer 12

Risk Exposure

Question 13

Significant declines in the volume of sales may indicate that the inventory may be overvalued due to _______.

Answer 13

Obsolescence

Question 14

For completeness testing, selecting a sample from A to see if it is included correctly in B, would we be testing the completeness of A or B?

Answer 14

B

Question 15

The statistical concept of ______ is used to describe the auditors evaluation of sampling results by calculating the possible error in either direction

Answer 15

Precision

Question 16

Does a successor auditor need to request that they can review the predecesor auditor’s engagement letter?

Answer 16

NO, only the working papers

Question 17

Do auditor’s report on or reference materiality in Agreed Upon Procedures?

Answer 17

NO

Question 18

When is a sale recorded with FOB Shipping Point?

Answer 18

Sale when SHIPPED

Question 19

When is a sale recorded with FOB destination?

Answer 19

Sale when ARRIVES

Question 20

When it comes to Review Engagements under SSARS, what TWO evidence-gathering procedures are the auditor’s typically performing?

Answer 20

Performing analytical procedures and making inquiries

Question 21

A Type 2 Subsequent event is an event that happened after year-end. Does this even need to be disclosed in the footnotes? Does this even need to be included by making an adjustment to the financial statements?
(Basically, is this a non-recognized event or a recognized event?)

Answer 21

Yes (needs to be disclosed)
No (do not adjust financial statements)
(Basically, this event is a NON recognized event)

Question 22

In an MD&A (Management Discussion and Analysis) presentation, the ________ assertion addresses whether nonfinancial data has been accurately derived from related records.

Answer 22

The CONSISTENCY assertion

Question 23

What kind of procedures are used in the planning stage of an audit to help an auditor gain an understanding of the client’s business?

Answer 23

Analytical Procedures

Question 24

When an auditor obtains evidence about how controls were applied, how consistently they were applied, and by whom they were applied, the auditor is gathering evidence that controls were operating:

Answer 24

Effectively

Question 25

Difference between KAMs and CAMs?

Question 26

When an auditor compares the dates that checks were deposited per the bank statement to the dates the checks were actually credited to the customer account, they are trying to detect the fraud of:

Answer 26

Lapping

Question 27

“Tracing” as a test is generally used to test:

Answer 27

Completeness

Question 28

CLASSICAL VARIABLE sampling allows you to select and analyze a small subset of the records in an account, and based on the result estimate the total audited value of the account, and the total amount of monetary misstatement. The estimates are computed as ranges: The point estimate is the midpoint of the range.

Question 28

What is the key to analytical procedures? Or in other words, what is the auditor trying to obtain for themselves?

Answer 28

An expectation for the results

Question 29

What type of engagement is an accountant performing if they are going to issue an examination report, a review report, or an agreed-upon procedures report on another party’s assertion?

Answer 29

An Attestation Engagement (Statements on Standards for Attestation Engagements)