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Research Studies Chapters 1-4 > Auditing week 1 > Flashcards

Auditing week 1 Flashcards

Auditing week 1

1
Q

What is a public company?

A

A company that sells its shares or bonds to the public, giving the public a valid interest in the proper use of the company’s resources

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2
Q

What does the Occurrence assertion in management assertions refer to?

A

Transactions and events that have been recorded or disclosed have occurred and pertain to the entity

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3
Q

What does the Completeness assertion involve?

A

All transactions and events that should have been recorded have been recorded

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4
Q

What does the Authorization assertion ensure?

A

All transactions and events have been properly authorized

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5
Q

What does Accuracy assertion verify?

A

Amounts and other data relating to recorded transactions and events have been recorded appropriately

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6
Q

What is the purpose of the Cutoff assertion?

A

Transactions and events have been recorded in the correct accounting period

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7
Q

What does the Classification assertion ensure?

A

Transactions and events have been recorded in the proper accounts

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8
Q

What is the Presentation assertion about?

A

Transactions and events are appropriately aggregated or disaggregated and clearly described

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9
Q

What does the Existence assertion confirm?

A

Assets, liabilities, and equity interests exist

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10
Q

What does the Rights and Obligations assertion state?

A

The entity holds or controls the rights to assets, and liabilities are the obligations of the entity

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11
Q

What does the Accuracy, Valuation, and Allocation assertion involve?

A

Assets, liabilities, and equity interests have been included at appropriate amounts

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12
Q

What is the definition of Materiality in auditing?

A

The magnitude of an omission or misstatement of accounting information that makes it probable that the judgment of a reasonable person would have been changed

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13
Q

What is Audit Risk?

A

The risk that the auditor mistakenly expresses a clean audit opinion when the financial statements are materially misstated

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14
Q

What does reasonable assurance imply?

A

Some risk that a material misstatement could be present in the financial statements and the competent auditor will fail to detect it

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15
Q

What is the purpose of audit evidence?

A

To assist the auditor in evaluating management’s financial statement assertions

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16
Q

What are the two key attributes of audit evidence?

A
  • Relevance
  • Reliability
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17
Q

What is the reason for using a sampling approach in audits?

A

It would be too costly for the auditor to examine every transaction

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18
Q

What is included in the title line of the audit report for public company audits?

A

“Independent Auditor’s Report”

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19
Q

What sections are included in the audit report?

A
  • Opinion on the Financial Statements
  • Basis for Opinion
  • Critical Audit Matters
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20
Q

What is an Unqualified audit report?

A

The most common type of report, indicating financial statements are free of material misstatements

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21
Q

What does a Qualified audit report indicate?

A

The financial statements are fairly stated except for a specific misstatement identified by the auditor

22
Q

What does an Adverse audit opinion mean?

A

The financial statements are not fairly stated and should not be relied upon

23
Q

What does a Disclaimer of Opinion indicate?

A

It is not possible to express an opinion on the fairness of the financial statements due to a scope limitation

24
Q

What skills are essential for an auditor beyond accounting concepts?

A
  • Logical thinking
  • Reasoning
  • Common sense
  • Imagination
  • Resourcefulness
25
Q

What does the auditor’s report conclude with?

A

Signature in the name of the audit firm, the personal name of the auditor, or both, as appropriate

26
Q

What are the four main types of auditors?

A

External Auditors, Government Auditors, Forensic Auditors, Internal Auditors

27
Q

Name the Big 4 public accounting firms.

A

Deloitte, EY, PwC, KPMG

28
Q

What are the 3 categories of public accounting firms aside from the Big 4?

A

Mid-Tier, Regional, Local

29
Q

What is the primary responsibility of a Partner in an audit team?

A

Reach agreement with the auditee on the scope of the service to be provided

30
Q

What are the selected duties of a Manager in an audit team?

A

Ensure proper planning, supervise preparation, review working papers, recommend audit judgments

31
Q

What is a Senior/In-Charge’s role in an audit team?

A

Assist in audit plan development, prepare budgets, assign tasks, supervise associates

32
Q

What are the main duties of an Associate/Staff in an audit team?

A

Perform assigned audit procedures, prepare documentation, inform seniors of problems

33
Q

List some notable corporate scandals that led to increased regulation in auditing.

A

Enron, Nortel, Livent, WorldCom, Arthur Andersen, Sino Forest

34
Q

What is the Sarbanes-Oxley Act known for?

A

Regulation of the audit profession, creation of PCAOB

35
Q

What is the primary responsibility of management in relation to financial statements?

A

Maintain effective internal control and ensure fairness of financial statements

36
Q

What are the five basic business processes organized by auditors for a financial statement audit?

A

Revenue Process, Financing Process, Purchasing Process, Human Resource Management Process, Inventory Management Process

37
Q

What is the primary body responsible for management oversight in Canadian corporations?

A

Board of Directors

38
Q

What does the audit committee do?

A

Oversees internal and external auditing work

39
Q

What is the role of the Canadian Securities Administrator (CSA)?

A

Regulates securities and auditing standards in Canada

40
Q

What are the main auditing standards organizations in Canada?

A

AASB, CPAB

41
Q

What does the acronym IAASB stand for?

A

International Auditing and Assurance Standards Board

42
Q

True or False: Auditing standards ensure that financial statement audits are inconsistent.

A

False

43
Q

What are the four categories of principles underlying an audit according to the AASB?

A

Purpose, Responsibilities, Performance, Reporting

44
Q

What is the purpose of an audit?

A

Enhance confidence of intended users in financial statements

45
Q

Fill in the blank: The auditor obtains _______ assurance about whether the financial statements are free from material misstatement.

A

reasonable

46
Q

What are the inherent limitations of an audit?

A

Nature of financial reporting, nature of audit procedures, time constraints

47
Q

What do auditors express in their report?

A

An opinion, modification of opinion, or denial of opinion

48
Q

What are the two classifications of auditing standards by the AASB?

A

Canadian Auditing Standards (CAS), International Standards on Auditing (ISA)

49
Q

What is the CPA’s Rules of Professional Conduct?

A

Guidance for acceptable behavior for auditors

50
Q

What is the definition of ethics in the context of auditing?

A

A system or code of conduct based on moral duties and obligations

51
Q

What is the definition of professionalism in auditing?

A

The conduct, aims, or qualities that characterize a profession or professional person

Research Studies Chapters 1-4 (10 decks)

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