Chapter 1 Flashcards
Audit is based on using _____ and _______ skills
analytical, logical
What are the two types of assurances?
account, transaction
What transaction assertion describes transactions have been recorded or disclosed, and those transactions pertain to the entity?
occurence
What transaction assertion describes that all transactions should have been recorded and all related disclosures have been included in the financial statements
completeness
What transaction assertion describes that all transactions have been properly authorized
authorization
What transaction assertion describes that amounts and other data related to recording transactions have been recorded appropriately
accuracy
What transaction assertion describes that all transactions have been recorded in the correct accounting period
cut off
What transaction assertion describes that transactions are recorded in the proper accounts
classification
What transaction assertion transactions and events are appropriately
aggregated or disaggregated and clearly described, and related
disclosures are relevant and understandable in the context of
the requirements of the applicable financial reporting framework.
presentation
Which assertion describes that assets, liabilities, and equity interests exist?
existence
Which assertion describes that the entity hold or controls the rights to assets and liabilities are obligations of the entity?
rights and obligations
Which assertion describes that All assets, liabilities, and equity interests that
should have been recorded have been recorded, and all related
disclosures that should have been included in the financial
statements have been included.
completeness
Which assertion describes that assets, liabilities, and equity
interests are included in the financial statements at appropriate
amounts and any resulting valuation or allocation adjustments
are appropriately recorded.
valuation and allocation
Which assertion describes that Assets, liabilities, and
equity interests have been included in the financial statements
at appropriate amounts, and any resulting valuation or allocation
adjustments have been appropriately recorded, and related
disclosures have been appropriately measured and described
accuracy, valuation, and allocation
Which assertion describes that Assets, liabilities, and equity interests have
been recorded in the proper accounts.
classification
Which assertion describes that Assets, liabilities, and equity interests are
appropriately aggregated or disaggregated and clearly
described, and related disclosures are relevant and
understandable in the context of the requirements of theapplicable financial reporting framework.
presentation
What are the three fundamental concepts in conducting an audit?
materiality, risk, evidence
What is the magnitude of an omission or misstatement of
accounting information that, in light of surrounding
circumstances, makes it probable that the judgment of a
reasonable person relying on the information would have
been changed or influenced by the omission or
misstatement.
materiality
What is the risk that the auditor expresses an
inappropriate audit opinion when the financial
statements are materially misstated.
audit risk
What is the highest level of clearance an auditor can give an audit
reasonable assurance
What is relevance in an audit?
is evidence related to the specific assertion being tested
What is reliability in an audit?
can the evidence be relied upon to signal the true state of the specific assertion being tested
What are the types of audit reports?
unqualified, qualified, adverse, disclaimer
What is a “clean” audit report called?
unqualified
What does a qualified audit report entail?
It is mainly good, but he/she finds it necessary to qualify that their is a misstatement identified by the author
What is an adverse report?
a statement saying the financial statements are not presented fairly and should not be relied upon
What is a disclaimer report?
a statement saying it is not possible to express an opinion on the fairness of the financial statements
Which source of information is the most cost effective, and most indirect to collect as an auditor?
the company’s internal controls
As a general rule, if the misstatements of a company’s total income exceed ____ %, this will cause financial statements to be materially misstated
5
If a small difference is unlikely to affect an investor’s decisions in any significant way, the auditor will likely consider the difference to be _________
immaterial
If UNA is required to obtain an audit to prove that rules and regulations in regards to student loans are being followed, what type of audit should they have?
Compliance
What is the highest level of assurance that can be offered to managers?
audits
Which is not a result of Sarbanes Oxley?
required publicly traded entities financial statements to be audited,
required that private companies have their financial statements audited at least every other year
What type of auditor is responsible for auditing the annual financial statements of publicly traded companies?
external auditors
Which of the following is an example of a principle?
absentee owners
Based on the evidence provided and fraud characteristics, an auditor is able to obtain assurance that is ________ and __________
reasonable, not absolute
what are the types of auditors?
external, internal, fraud, government
When was Sarbanes Oxley passed?
2002
Who is in charge of guidelines for nonpublic companies?
auditing standards board
who is in charge of the guidelines for public companies
PCAOB
The risk that information circulated by a company’s management could be false or misleading
information risk
the concept that the manager has more information about the true financial position and results of operation of the entity than the absentee owner does
information asymmetry
