Audit Issues Flashcards
1
Q
4 step process
A
RAMP
1) risk
2) approach
3) materiality
4) procedures
2
Q
1) Risk
A
- identify case facts (factors increases and decreasing risk)
- explain why the case fact is a risk
- conclude
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)
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
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