Audit Standards & Engagement Planning Flashcards
What are the 5 service that require independence
C.A.R.E.S
Compilations Agreed Upon Procedure Reviews Examinations- Audit Special purpose
What are the 3 types of audits
Operational
Compliance
Financial reporting
What is an operational audit ?
An operation audit exams whether the organizational goals are being met according to budget
What is an compliance audit?
A compliance audit is an examination on whether or not organization are following laws or regulations.
They are normally done by governments or regulatory agencies
When is a compliance audit done
Randomly
There have been incidence that speculate that there is non compliance
What is a financial statement audit?
Is an examination of financial statements to give an opinion on the financial stay to state whether they are fee from errors or fraud and are created with the appropriate AFRF
What are auditors responsibilities in the engagement letter?
- Conduct an audit in accordance with GAAS
2. Inform the client of any improvements that can be made to operations or control that hey come across
What are the clients responsibility?
- Making all records available to auditor
- Not limiting the scope of the auditors work
- Paying the fee based on agreed upon method
What are risk assessment procedures used for?
To gain an understanding of the entity its environment and internal control
What is further audit procedures used for
As a response to assess risk and the evaluation of audit risk
What are the 3 considerations of the audit program
Materiality
Risk of Material misstatement
Business and industry considerations
What is another name for further audit procedures?
Substantive test
If there are different material levels for different statement what do you choose
The smallest one
What time of relationship does audit risk and materiality have?
Inverse
What happens when assessment of audit risk low?
The item is less likely to influence users decision therefore a larger misstatement to an item will have less effect than a smaller misstatement on a more sensitive item. Which in turn will cause materiality to be set at a high level
What happens when the assessment of audit risk is high?
The items is more likely to influence user decisions therefore a smaller misstatement will have a greater impact on user than a larger impact. Materiality would be se at a low level
What is performance materiality
The materiality that was not found when assess as a whole but rather when combine with others become material
What is another name o material misstatement
Tolerable misstatement
What is control risk
The risk that controls in place will not detect error or fraud
What is inherent risk?
Inherent risk is the risk when there is no co trolls in place
What is detection risk?
It is the risk that the auditor will not detect errors or fraud
What is the relationship between detection risk and RMM?
Inverse;
What are the types of misstatements?
Errors-that are unintentionally and fraud which are intentionally
What are the 2 types of fraud?
Fraudulent financial reporting- cooking the books
Misappropriation of assets
