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ACCT 3222 > ch 9 review (exam 2) > Flashcards

ch 9 review (exam 2) Flashcards

1
Q

what are the levels to consider risk impacts in regards to substantive procedures

A

financial statement level and assertion level

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2
Q

what are some examples of risk impacts at the financial statement level

A

management pressure to meeting earnings target, auditor’s response to this risk, more elements of “unpredictability”, make change to the NET as needed, more experienced staff/ more supervision

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3
Q

what are some risks impact at the assertion level

A

auditor’s response to risk: FIVE CAROTS

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4
Q

what is assertion level

A

account balance/ transaction

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5
Q

substantive procedures ______________ to perform for all ________________

A

required; relevant assertions

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6
Q

nature of substantive procedures is most like which of the following: who, what, when, where, why, how

A

what

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7
Q

what is considered the most important factor when responding to assessed risks

A

nature of substantive procedures

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8
Q

what are. 2 types if substantive procedures

A

1) test of details
2) substantive analytical procedures
- combo of both

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9
Q

what are three factors to consider when determining the type of substantive procedure:

A
  • assessed level of risk for the assertion
  • reason for the assessed level of risk
  • suitability of the procedure for the assertion being tested (is the auditor using the “best” procedure)
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10
Q

initial procedures for auditing an account balance

A
  • obtain trial balance or other detailed report- test for mathematical accuracy
  • agree beginning balance to prior year audit working papers
  • scan for unusual items
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11
Q

must be sure that the ______________ is chosen for the assertion that is being tested

A

appropriate procedure

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12
Q

what is confirmation bias

A

tendency of the auditor to interpret evidence in ways that support pre-existing expectations

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13
Q

what is the timing of substantive procedures related to: who, what, when, where, why, how

A

when

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14
Q

when are substantive procedures conducted

A

some at interim (end of 3Q) or but most at year end

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15
Q

what are roll forward procedures

A

update audit findings from the time of interim procedures through year-end

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16
Q

what are some factors to be considered that would affect risk of material misstatement

A

Internal Controls; Change in the accounting from interim to year-end; Can procedure be performed at interim

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17
Q

the extent of substantive procedures depends on ____________________

A

auditor judgement

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18
Q

can rely on__________________ for extend of substantive

A

audit risk model

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19
Q

extent also refers to ___________________________

A

sample size

20
Q

_______________ factors considered when determining sample size

A

quantitative and qualitative factors

21
Q

what are some options when selecting sample size

A
  • testing 100%
  • select specific items from the population
  • statistical sampling (true random sample
22
Q

what is testing 100%

A

for a small number of transactions; uses ADA to test 100%; depends on format of client’s data

23
Q

are are specific items selected from the population

A

sample is usually based on auditor’s judgement;
usually choose accounts with high dollar transaction or unusual transactions

24
Q

what is statistical sampling

A

true random sample

25
Q

can specifically chosen items from population be projected to whole population

A

no; not truly random

26
Q

what is an accounting estimate

A

a monetary amount for which the measurement is subject to an inherent lack of precision

27
Q

what are 2 accounting estimates

A

forecast and determining FV

28
Q

what is the auditor’s. objective? obtain __________ evidence that estimates and related disclosures are _________

A

sufficient appropriate; reasonable

29
Q

what are three inherent risk factors

A
  1. estimation uncertainty (EU)
  2. complexity
  3. subjectivity
30
Q

what is estimation uncertainty (EU) in context of IRs

A

lack of precision

31
Q

where there is more estimation uncertainty there is ___________ risk

A

more

32
Q

what is complexity in context of IRs

A

method uses complex assumptions; may need a specialist; obtaining data is complex

33
Q

what is subjectivity in context of IRs?

A

GAAP may not specify a method; uncertainty about the future

34
Q

what is management bias

A

lack of neutrality by management in the preparation and fair presentation of information

35
Q

risk assessment procedures for accounting estimates:
- gain understanding of ___________________
- gain understanding of ___________________

A

the entity and its environment; IC related to estimates

36
Q

what are some questions to ask to gain an understanding of the entity and its environment

A

what are the material estimates?
who prepares them?
outcome of PY estimate?

37
Q

what are two risk response procedures for accounting estimates:

A
  1. test of controls, if taking reliance controls strategy (interim)
  2. test how management made the estimate
38
Q

how can how management made the estimate tested

A

recalc and inspect management’s assumptions (reasonable)

39
Q

what are some substantive procedures that are in response to the risk for accounting estimates

A

-inspect events occurring after YE and up to the date of the auditor’s report
- test how management made the estimate
- develop an auditor’s estimate or range

40
Q

what is a misstatement-

A

difference between a reported financial statement item (client-prepared) and what is required for the item to be in accordance with the financial reporting framework (GAAP)

41
Q

what are three types of misstatements

A
  • factual misstatements
  • judgmental misstatements
  • projected misstatements
42
Q

what are factual misstatements

A

no doubt it is a misstatement; no judgment involved

43
Q

judgmental misstatements

A

poor selection of accounting policy; unreasonable accounting estimates/ FV amounts

44
Q

what are projected misstatements

A

from statisical sampling

45
Q

what is auditors identify more misstatements than expected

A

re-evaluate audit strategy

46
Q

in re-evaluating audit strategy auditors can

A

retest Internal controls, modify NET

47
Q
A

ACCT 3222 (16 decks)

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