Audit Issues Flashcards

1
Q

4 step process

A

RAMP
1) risk
2) approach
3) materiality
4) procedures

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2
Q

1) Risk

A
  • identify case facts (factors increases and decreasing risk)
  • explain why the case fact is a risk
  • conclude
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3
Q

2) Approach

A
  • substantive or combined
  • identify case factors (grocery store with cash control weakness)
  • analyze case facts (grocery store has large amount of small transactions which would mean combined would be more efficient but combined cannot be taken as there is a control weakness)
  • conclude (substantive procedures will be used due to control weakness, however combined can be used on accounts unrelated to the control weakness)
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4
Q

3) Materiality

A
  • users and objectives
  • based is chosen on user objectives
  • based is often normalized NIBT, however, is loss position the base is revenue and if NFPO the base is expenses
  • PM is based on RMM and should not exceed OM
  • SM based on user needs and is used if they are concerned about a specific account
  • If SM is calculated, SPM should also be calculated for auditors
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5
Q

4) Procedures

A
  • identify specific account risks and explain why it is a risk (FR issues identify that revenue recognized too early so the risk is that revenue is overstated)
  • design the audit procedure: obtain documentation that supports the balance you are looking for (A/R detail or revenue listing), and preform tests on the documentation by comparing (recalculate, compare to invoices)
  • RAP: risk, assertion and account, procedure
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