Brainscape's Knowledge GenomeTM

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


See full index

AUD > Audit Initial Items/ Control Testing > Flashcards

Audit Initial Items/ Control Testing Flashcards

1
Q

Client IC and evidence needed relationship

A

Inverse

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

Initial Meeting with client

A

identify scope, timing, and observation (spefically inventory)

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

Risk Assessment Steps

A

1 - inquires with management
2 - analytical procedures
3 - observation and inspection

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

How to determine risk

A

Liquidity increase risk

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

Detection Risk is inverse to

A

Materiality

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

To reduce detection risk

A

1 - increase effective procedures
2 - increase year end procedures
3 - increase extent of testing

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Deciding to continue with a client you need

A 
1 - internal audit report
2 - interim statements
3 - quarterly reports
4 - board minutes
5 - materiality check
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Substantive procedures used are based on

A

UNDERSTANDING of IC

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Analytical Procedures

A

1 - part of risk assessment - mandatory
2 - used to form an audit conclusion
3 - can be used to decide on substantive procedures - not mandatory

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

Substantive Procedures are used to

A

Find material misstatements at the assertion level

Include:
1 - Analytical Procedures
2 - test of details

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Analytical Comparisons

BEST USED

A

1 - Account Balances
2 - Ratios
3 - Budgetary Expectations from auditor

Income statement items is best use

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Analytical Procedures used and audit risk relationship

A

DIRECT

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What is a significant variance for analytical comparison

A

Changes of 10% or more

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Analytical Procedures aid in risk assessment by

A

1 - overall entity understanding
2 - comparisons
3 - development of a conclusion

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Strongest Audit Procedure carried out by analytical

A

Substantive procedures because misstatements at the assertion level can be detected

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Noncurrent assets and liabilities

A

integral to OVERALL PROFITABILITY

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Immaterial Fraud in IC

A

Must follow to a conclusion

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Factors that increase Fraudulent reporting

A

1 - Complexity of systems
2 - management overrides
3 - inability to generate CF
4 - high MGMT turnover

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

IC fraud risk is identified by

A

Evaluation of IC designs and implementation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Responses to Fraud Risk

A

1 - Assessing overall risk
1a- assign more experienced staff
1b - unpredictable audit procedures
1c - applications of accounting principles on a cum. basis
2 - changes in timing nature and extent based on risk
3 - address MGMT override
3a - retrospective review of significant accounting estimates

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

Fraud detection and misstatement detection

A

not the same thing

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

Auditors responsibility for FS

A

in conformity with REPORTING STANDARDS

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

Fraud

A

ALTERATION OF RECORD to benefit the company as a whole financial position

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

Misappropriation of Assets

A

Employees are altering records because they are stealing for their own personal gain

Liquid Assets are at highest risk

Bearer bonds negotiable by delivery are at high risk

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

Most difficult level to detect fraud

A

Highest Level

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

Fraud
1 - always easily identified
2 - can be detected through correct procedures

A

1 - management override

2 - improper revenue recognition

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

Management refusal to change MATERIAL item

A

1 - auditor notifies the board of resignation & consult legal advice
2 - board takes no action auditor must go to the SEC

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
28
Q

Noncompliance risk factors

A

unexpected or large cash payments

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
29
Q

ISA and noncompliance

A

Direct and indirect bear the same effect

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
30
Q

Non Compliance Excludes

A

1 - internal control
2 - manipulation records
3 - info and communication

RELATES TO OPERATING RATHER THEN ACCOUNTING

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
31
Q

Compliance audit

A

opinions are expressed

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
32
Q

Auditor can rely on internal assertions of

A

Cash
Prepaid
Fixed Asset Additions

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
33
Q

Management specialist

A

assist client in F/S prep

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
34
Q

Auditor related party transactions responsibility

A

1 - evaluation of management’s substantiation/assertions

Can have an emphasis of matter paragraph

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
35
Q

Related party transactions should be

A

arms length

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
36
Q

Related party transactions require minimal testing on

A

Authorization (found in confirm)

Approval

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
37
Q

Related party evidence

A 
1 - mtg minutes
2 - filing with regulators
3 - conflicts of interest stmt
4 - transactions w/ major entities
5 - large reoccurred transactions 
6 - compensating balance & legal confirms
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
38
Q

Risk Analysis/ Reasonableness

1st step

A

understanding of management

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
39
Q

Estimates are based on

A

Collective amounts
Objective
Subjective

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
40
Q

Test Management Overrides of Fraud by

A

Analytical procedures

Comparison of actual to budgeted

41
Q

IC development Criteria

A

Cost Benefit

42
Q

IC Decentralized versus centralized

A

Decentralized is more effect

Centralized is easier to identify deficiencies

43
Q

IC

Understanding

Effectiveness

A

1 - what controls have been implemented ; NEEDED FOR GAAS

2 - test of controls if auditor feels like controls can be relied on ; MANAGEMENT MAKES ASSERTION ON EFFECTIVENESS

44
Q

Client Lines of Reporting

A

Determination of management’s ability to circumvent IC which is a part of risk assessment

45
Q

Detection Risk relates to

A

SUBSTANTIVE PROCEDURES

46
Q

Narrative Memorandum

A

Process of Flow Documents and control points

47
Q

Assurance on what

A

test are being preformed to corroborate management assertion

48
Q

IC materiality versus F/S material

A

SAME

49
Q

IC reports
Issuers
Nonissuers

A

Issuers required to provide an assessment of IC

not required if desired:
1 - included in management rep letter and/or
2 - seperate report to be put into auditors report

50
Q

IC Opinion Time Frame

Issuer

Nonissuer

A

1 - as of specific date based on criteria

2 - over a period of time

51
Q

Section 404 SOX requires

A

1 - attest report on managements assertions of IC

52
Q

Integrated audit begins at

Top - down

A

Statement Level

Entity Level Control - specific accounts

53
Q

Sufficient Evidence of IC

A

1 - Inquire along w/ (not sufficient alone)
2 - Observation
3 - Tracing Reports

54
Q

Reliance of Controls (similar to test of effectiveness)

A

1 - identify and understand controls
2 - perform test of controls
3 - assess test of controls by determining scope for sub procedures

55
Q

Test of Controls Efficiency

A

Not required under GAAS unless it is determined that IC cannot be trusted then evaluation effectiveness

56
Q

General Controls

Application Controls

A

1 - ALL

2 - SPECIFIC

57
Q

Timing of substantive tested related to controls is based on

A

1 - availability

2 - retrievability

58
Q

Checks received from customers should be

A

RESTRICTIVELY ENDORSED

59
Q

Fidelity Bonds

A

protect employers from against fraudlent acts by employees

60
Q

When do you test effectiveness of IC

A

when substantive procedures are not efficient ; if sub procedures are efficient then do not TEST

EX automated system with no documentation

61
Q

Changes in IC

A

test before relied upon

62
Q

IC is ineffective then

A

Risk of material misstatement is heightened

63
Q

Response to ineffective IC

A

increase substantive procedures

64
Q

Substantive procedures are a response to

A

Misstatement @ assertion level

Lower Audit Risk more testing

65
Q

Testing of Controls Effectiveness

A

1 - Inquire W/
2 - Observation - strongest
3 - Inspection - sub
4 - Recalculation - sub

66
Q

Writing to audit committee restriction

A

Can only give in writing that significant deficiencies and material weakness

If none don’t write

67
Q

Reduction in materiality requires

A

greater assurance from SUB procedures

68
Q

Analytical Procedure

1st Step

A

Develop and expectation

Compare accounting records or ratios with expectation

69
Q

Auditors Responsibility to Non-Compliance

A

responsible to identifying material and direct interest only

NO ASSURANCE RESPONSIBILITY

70
Q

What comes before assessing CONTROL risk

A

UNDERSTANDING OF INTERNAL CONTROL

71
Q

Audit Plan

A

1 - description of risk assessment procedures
Risk Assessment Procedures
a - analytical
b - inquires/observation/inspections
2 - description of further & other audit procedures

72
Q

Inherent Risk is higher

A

amounts derived from estimates
amounts that are uncertain

EX hedging

73
Q

precondition of an audit

A

management acknowledges its responsibility for IC

74
Q

complete audit plan is developed

A

after
1 - understanding IC
2 - assessing risk to material misstatement

75
Q

Preliminary Materiality

A

judgement of auditor based on many factors; can be used to assess materiality

76
Q

Planning material

A

does not relate to one financial statement; but the audit as a whole

77
Q

Fraud AND NONCOMPLIANCE keywords

A

MATERIAL MISSTATEMENT

78
Q

ANALYTICAL PREFERENCE

A

FINANCIAL OVER NON-FINANCIAL

79
Q

Auditor relies on the competence of another; unless

A

for inventory auditor ALWAYS OBSERVE PHYSICAL INV

80
Q

WHO SUBSTANTIATES RELATED PARTY at arms length

A

MANAGEMENT

81
Q

For the following items made by management the auditor should:
Assumptions

Assertions

A

evaluate individually and as a whole form a reasonable basis

obtain sufficient evidence to express and opinion

82
Q

Routine related party transactions auditor should evaluate

A

whether transactions would have occurred if parties were not related

83
Q

Consulting include

A

analysis
review
prep of certain docs

84
Q

Audit Engagement Plans

Financial Statement Plans

A

need understanding of IC

need to known overrall audit strategy

85
Q

Internal control preformance review

A

Activities used my MANAGEMENT to SUPERVISE IC

86
Q

information system keyword

A

HOW INFO IS PROCESSED

87
Q

RISK A MATERIAL MISSTATMENT ASSESSES

A

FURTHER CONTROLS

88
Q

AUDIT PLAN YOU NEVER

A

DOCUMENT

89
Q

IC STEPS

A

1 - EVALUATE
2 - ASSESS RISK
3 - FURTHER AUDIT
4 - TEST - NOT PLANNING

90
Q

UNDISCLOSED ITEMS

A

Significant deficiency

91
Q

nonissuer ic auditor can examine if the following conditions are met

A

1 - client makes a seperate IC report

2 - client representation letter

92
Q

no test of controls

A

high risk

93
Q

nature

A

test changed due to risk assessment

94
Q

extent

A

additional procedures

95
Q

management override

A

operational

96
Q

test controls

test monitoring

A

simulate

observe

97
Q

Risk Assessment

A

Before risk assessment you must have procedures to get there to assess the risk:
procedures include:
analytical
inquiry
observation
WHICH HELP GAIN AN UNDERSTANDING OF THE ENVIRONMENT

98
Q

ANALYTICAL PROCEDURES USED AS

A

PROCEDURES FOR RISK ASSESSMENT

PROCEDURES FOR SUB. TESTING

AUD (15 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions