Audit FINAL Flashcards
Intro Paragraphs need
Identify Entity
State Fin Stmts have been Audited
Identify Title of Each Fin Stmt
State Dates or Period covered by each Fin Stmt
Manager Paragraph needs
Mgmt is responsible for prep and fair presentation of fin stmts
and
responsible for Internal Controls
1st Part of Auditors Paragraph aka?
Needs what?
Scope Paragraph
Responsibility to Express Opinion
Conducted with audit standards generally accepted in America
And that requires auditor to obtain reasonable assurance that fin stmts are free from material misstatement
2nd Auditors Paragraph needs
Audit involves performing procedures to obtain audit evidence
Procedures depend on auditors judgement
Considers how the entity’s Internal Controls affect the prep of fin stmts
Evaluates acct polices and estimates Mgmt uses
Unmodified Opinion Paragraph needs
to say presented fairly
and
in accordance with the applicable financial reporting framework
Mean Per Unit Estimation Equation
Average Audit Value (Audit Value of Sample Total divided by # of audited items)
times
Total number of items in the population
Ratio Estimation
Audit Value of Sample Total
divided by
Book Value of Samples Total
times
TOTAL BOOK Value
Difference Estimation
Book Value of Samples Total
minus
Audit Value of Sample Total
divided by
of audited sample items
times
TOTAL # of items
Parallel simullation
is when the auditor uses client data and auditor-controlled software to obtain output. The auditor’s output is compared to the output from the client. Differences indicate potential weaknesses or problems with the client’s software.
Test data
is introduced into the client’s computer system using the same program to operate the application being tested. This type of control testing is not under the auditor’s control, as it uses the client’s actual program.
An integrated test facility
An integrated test facility introduces a fictitious entity (such as a fake employee or customer) with real entries in the master files of the client’s computer system. The auditor then compares the processing of data through the fictitious entity with what should be there in order to test that the data processing is reliable. Like the test data (or test deck) approach, an integrated test facility uses the client’s system and is not under the auditor’s control.
What is the auditor not required to do in pro forma FS
evaluate IC
Accountant’s compilation report on financial forecast would state what…?
- contain the statement that forecasted results may not be achieved (there will usually be differences between the forecasted and actual results),
- explain that the CPA assumes no responsibility to update the report for future events and circumstances occurring after the date of the report
Auditing report of non- for profit organization in accordance with GAS should state what type of assurance?
report regarding tests of compliance should contain positive and negative assurances.
A positive assurance consists of a statement that the tested items were in compliance with applicable laws and regulations.
A negative assurance is a statement that nothing came to the auditor’s attention as a result of specified procedures that caused the auditor to believe that the untested items were not in compliance with applicable laws and regulations.
Auditor ordinarily consider the greatest risk regarding an entity’s use of electronic data interchange (EDI)?
Improper distribution of EDI transactions
For uncorrected misstatements, the auditor should document all of the following,
The auditor should include in the audit documentation:
the amount below which misstatements would be regarded as clearly trivial;
all misstatements accumulated during the audit and whether they have been corrected; and
the auditor’s conclusion about whether uncorrected misstatements are material, individually or in aggregate….
Describe the test data approach to test accounting system
Test data is processed by the client’s computer programs under the auditor’s control.
The test data need consist of only those valid and invalid conditions that interest the auditor.
Only one transaction of each type need be tested.
What is the benefit of using electronic funds transfer for international cash transactions
Reduction of the frequency of data entry errors
a step in an auditor’s decision to assess control risk below the maximum?
1.Identify specific control activities that are likely to detect or prevent material misstatements.
2. perform test of controls (NOT DETAIL)
DOCUMENT ALL
Examination of prospective FS involves what?
An examination of prospective financial statements is a professional service that involves:
Evaluating the preparation of the prospective financial statements.
Evaluating the support underlying the assumptions.
Evaluating the presentation of the prospective financial statements for conformity with AICPA presentation guidelines.
Issuing an examination report.
When there has been a change in accounting principle, but the effect of the change on the comparability of the financial statements is not material, the auditor should:
not refer to consistency in the auditor’s report.
