chap 13 design of the audit program

Question 1

the predicted results of tests of controls and substantive tests of transactions affect the design of what?

Answer 1

the tests of details of balances

Question 2

what is the difficulty the auditor faces in designing tests of details of balances?

Answer 2

the need to predict the outcome of the tests of contgrol, substantive tests of transactions, and substantive analytical procedures before they are performed

Question 3

for lower materiality level, more testing of what is required

Answer 3

details

Question 4

auditors put heavy emphasis on tests of controls when ? (2)_

Answer 4

1. controls are effective 2. control risk is assessed as low

Question 5

when designing tests of controls and substantive tests of transactions, auditors emphasize satisfying which objectives?

Answer 5

transaction related audit objectives

Question 6

tests of controls and substantive tests of transactions will vary depending on what?

Answer 6

assessed control risk

Question 7

what are the 2 reasons an auditor performs substantive analytical procedures for an account balance?

Answer 7

1. identify possible misstatements in the account balances 2. reduce tests of details of balances

Question 8

if the auditor identifies a significant risk due to either fraud or error the auditor should do what 2 things?

Answer 8

1. identify client controls to mitigate the risk 2. design substantive procedures to determine whether material misstatements occurred due to the significant risk

Question 9

the planned tests of details of balanes include ? (4)

Answer 9

1. audit procedures 2. sample size 3. items to select 4. timing

Question 10

each transaction cycle will likely be evaluated useing a separte set of what?

Answer 10

sub audit programs

Question 11

effective controls will reduce control risk and along with it the amount of evidence required for what 2 types of testing

Answer 11

1. substantive tests for transactions 2. tests of details of balances

Question 12

once the auditor determines the appropriate emphasis on each of the ther 4 types of tests, she must design what?

Answer 12

the specific audit procedures for each type of test

Question 13

assuming the audit is of a smaller public , or a nonpublc company, if control risk is assessed at a maximum, only what tests will be used?

Answer 13

substative tests of transactions

Question 14

even when all transaction related audit objectives are met, the auditor will stil rely primarilyon substantive test of balances to meet which 2 balance related audit objectives?

Answer 14

1. realizable value 2. rights and obligations

Question 15

the tests of controls and substanttive tests of transactions audit program normally includes (3)

Answer 15

1. descriptive section documenting the understanding of internal control obtained 2. a description of the procedures performed to obtain an understanding of iternal control 3.; descriiption of the assessed level of control risk

Question 16

the specifidc audit procedures for each test are combined to form the what?

Answer 16

audit program

Question 17

after the evidence mix is approved, the incharge prepares the audit program or modifies an existing program to satisy all audit objectives considering things such as ? (6)

Answer 17

1. materiality 2. evidence mix 3. inherent risk 4. control risk 5. any identified significant risks 6. the need for an integrated audit for larger public companies

Question 18

in most audits, who reccomends the evidence mix to the engagement manager?

Answer 18

the engagement in charge auditor

Question 19

what is the 4 step approach to reduce assessed control risk?

Answer 19

1. apply the transaction related audit objectives to the class of transactions being tested 2. identify key controls that should reduce control risk for each transaction related audit objective 3. develop appropriate tests of controls for all internal controls that are used to reduce the preliminary assessment of control risk below maximum (key controls) 4. for potential tyypes of misstatements related to each transaction related audit objective, design appropriate sustantive tests of transactions, considering deficiencies in internal control and expected results of the tests of controls in step 3

Question 20

to design test of details of blances audit procedures, auditors use a methodology oriented to what objectives?

Answer 20

the balance related audit objectives