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ACCT 3222 > ch 5 review (exam 2) > Flashcards

ch 5 review (exam 2) Flashcards

1
Q

Financial statements are:
1.
2.

A
  1. prepared by management
  2. includes representations made by management about recognition, measurement, presentations and disclosures
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2
Q

what are three assertions management is making about inventory shown on the balance sheet?

A

-the items exist
- items are owned by the entity
- items are valued appropriately

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3
Q

what are managements assertions

A

representations made by management int he financial statements

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4
Q

The AICPA Audit Standards Board (private companies) has how many management assertions

A

12 assertions

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5
Q

The PCAOB (public
companies) has how many managements assertions

A

5 assertions

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6
Q

What are the private company assertions for classes of transactions and related disclosures (income statement focus)

A
  1. occurence
  2. completeness
  3. accuracy
  4. cutoff
  5. classification
  6. presentation
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7
Q

which ASB assertion is the following: management claims all transactions and disclosures that should have been disclosed are disclosed

A

completeness

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8
Q

which ASB assertion is the following: management claims transactions occurred and pertain to the company

A

occurence

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9
Q

which ASB assertion is the following: all transactions have been recorded appropriately and related disclosures are appropriately measured and described

A

accuracy

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10
Q

which ASB assertions is the following: management claims transactions in correct accounting periodq

A

cutoff

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11
Q

which transaction is the following: management claims that transactions are included in the right category and any related disclosures are relatable and understandable in the context of the applicable accounting framework

A

presentation

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12
Q

What are the private company assertions for account balances and related disclosures (balance sheet focus)

A
  1. existence
  2. rights and obligations
  3. completeness
  4. accuracy, valuation, allocation
  5. classification
  6. presentation
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13
Q

which ASB assertion is the following: balance sheet items actually exist

A

existence

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14
Q

which ΑSB assertion is the following: management claims they hold and control rights to assets on the balance sheet and liabilities are actually obligations of the entity

A

rights and obligations

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15
Q

which ASB assertion is the following: all balance sheet items that should have been recorded have actually been recorded and all related disclosures are complete

A

completeness

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16
Q

which ASB assertion is the following: items on balance sheet reported at appropriate amounts and any resulting valuation or allocation adjustment have been appropriately recorded and relate disclosures appropriately measured and described

A

accuracy, valuation, allocation

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17
Q

which ASB assertion is the following: management recorded balance sheet items in proper accounts

A

classification

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18
Q

which ASB assertion is the following: balance sheet items grouped appropriately related

A

presentation

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19
Q

During risk assessment and planning assertions are used as a guide for assessing _________ and ___________

A

Risk of Material Misstatement and “What can go wrong”

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20
Q

During risk assessment and planning identify _______________ for significant accounts and transactions and implement the __________________

A

relevant assertions; audit risk model

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21
Q

what are relevant assetions

A

assertions that are reasonably possible to contain a material misstatement that would cause FS to be MM

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22
Q

After assessing risk with audit risk model, plan __________ and create ____________

A

NET; audit program

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23
Q

what is an audit program

A

listing of audit procedures that’ll be performed relating to each FS item

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24
Q

what are the public company assertions from PCAOB

A
  1. existence or occurence
  2. completeness
  3. valuation/ allocation
  4. rights and obligations
  5. presentation and disclosure
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25
Q

audit procedures and most like which of the following: who, what, when, where, how, why

A

how

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26
Q

what are audit procedures

A

methods used by audits in gathering audit evidence (specific actions)

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27
Q

financial statements are not statements of facts they are ___________________ made by management about recognition, measurement, presentation, and disclosure of information in the financial statements

A

claims and assertions

28
Q

assertions are used as a _________ during risk assessments

A

guide

29
Q

what are the four forms of information

A

oral; visual; paper; electronic

30
Q

what are the 2 characteristics of audit evidence

A

sufficient and appropriate

31
Q

the characteristic “sufficient” is a ____________ factor

A

quantitative

32
Q

what is the “sufficient” characteristic

A

do we have enough evidence? (use professional judgement)

33
Q

the characteristic “appropriate” is a ______________ factor

A

qualitative

34
Q

what is the “appropriate” characteristic? ___________ and _________________ of audit evidence

A

relevance and reliability

35
Q

rank (from most reliable to least reliable) the source of audit evidence

A
  1. external evidence
  2. auditor observation and knowledge
  3. internal evidence
36
Q

to obtain reasonable assurance, evidence must be _____________ (both sufficient and appropriate) for auditors to draw a conclusion

A

persuasive

37
Q

if RMM is high then will the level of sufficient appropriate evidence increased or deceased

A

increased

38
Q

if Detection Risk is low that will ____ level of sufficient appropriate evidence (increase or decreasee)

A

decrease

39
Q

audit procedures can be categorized into these three categories:

A
  1. risk assessment procedures
  2. test of controls
  3. substantive procedures
40
Q

risk assessment procedures are used to

A

obtain an understanding of the entity and its environment including its IC to assess the risk of material misstatement

41
Q

test of controls are use to

A

evaluate the operating effectiveness of internal control in preventing or detecting material misstatement

42
Q

substantive procedures are used to

A

detect material misstatements

43
Q

what are the two subsets of substantive procedures

A

test of details; analytical procedures

44
Q

what is the acronym for the standard procedures used un every audit as risk assessment procedures, test of controls, and or substantive test:

A

F
I
V
E
C
A
R
O
T
S

44
Q

what is the finished product of risk assessment and planning

A

audit program

45
Q

what are the two most common forms of confirmations

A

bank and receivable

46
Q

what do bank confirmations confirm

A

cash accounts, investments, loans, etc

47
Q

what do receivable confirmations confirm

A

confirm they exist by directly contacting a sample of customers of the client

48
Q

who controls confirmations

A

auditor

49
Q

can confirmations be sent out at client building

A

NO

50
Q

what is an auditor’s sspecilist

A

an expertise in the field other than accounting/ auditing whose work in that field is used by the auditors to assist in obtaining sufficient appropriate evidence

51
Q

you figure out if you need a specialist during what phase

A

risk assessment

52
Q

who can be a specialist?

A

employee of accounting firm; usually contracted

52
Q

auditors should assess what three things about a specialist

A

competence, capability, objectivity

53
Q

who dictates what the specialist does, when and type of report/ documentation needed

A

auditors

54
Q

are internal auditors independent

A

no

55
Q

who are internal auditors

A

employees of the client that performs assurance/ consulting activities designed to evaluate and improve the effectiveness of the entity’s governance, risk management, and IC processes

56
Q

the external auditors must asses these three things about internal auditors

A

objectivity; competence; processes

57
Q

how can external auditors use the work of internal auditors?

A
  1. use work already completed or planned to be completed by IAS
  2. use the IAs to provide direct assistance on the audit
58
Q

a group financial statement may require a ___________

A

group audit

59
Q

what are the two types of confirmations

A

positive and negative

60
Q

what is a positive confirm

A

ask for a response in all cases; must follow up on all non-responses

61
Q

what is a negative confirm

A

ask for a response only if they disagree

62
Q

what is a permanent file

A

information that doesn’t change much from year to year

63
Q

what is a current file

A

information related specifically to the current year audit

64
Q
A

ACCT 3222 (16 decks)

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