Chapter 1 LO4 Flashcards
List the causes of information risk, and explain how this risk can be reduced
what is the most common way for users to obtain reliable info ?
have an independent audit
as a way to reduce info risk , what does:”User shares information risk with management” mean?
Management is responsible for providing reliable information, and may be held responsible in a lawsuit if inaccurate information is provided
decision makers use audited info on the assumption that it is _____ what? (3)
reasonably 1. complete 2. accurate 3. unbiased
what is Biases and motives of the provider in causes of info risk?
Information is provided by someone whose goals are inconsistent with those of the decision maker and may be biased
Decision makers do not have firsthand knowledge and must rely on information provided by others.. what kind of cause of info risk is this?
remoteness of info
What are the 3 main ways to reduce info risk?
- user verifies info 2. user shares info risk with managers 3. auditied financial statments are provided
Information is provided by someone whose goals are inconsistent with those of the decision maker and may be biased. what kind of cause of info risk is this
Biases and motives of the provider
The user may go to the business to verify the information. what way of reducing info risk is this
user verifies info
Higher volumes of transactions increase the likelihood of undetected errors. what kind of cause of info risk is this
voluminous data
Transactions are increasingly complex and more difficult to record properly. Complex accounting standards are difficult to interpret and apply. what kind of cause of info risk is this
Complex exchange transactions
as a way to reduce info risk, what does “User verifies information” entail
The user may go to the business to verify the information.
what is remoteness of info?
Decision makers do not have firsthand knowledge and must rely on information provided by others.
what is the difficulty with sharing info risk with managment?
users may not be able to collect on losses. if company goes bankrupt…unlikely managment have funds to repay users
Management is responsible for providing reliable information, and may be held responsible in a lawsuit if inaccurate information is provided. what way of reducing info risk is this?
user shares info risk with managers
external users like stockholders and lenders who rely on those financial statement to make business decisions look the auditors report as an indication of what?
the statements reliability
what is Complex exchange transactions as a cause of info risk?
Transactions are increasingly complex and more difficult to record properly. Complex accounting standards are difficult to interpret and apply.
what is an example of Biases and motives of the provider in causes of info risk?
used care salesman. he wants to sell you want a good deal. these goals are inconsistent
what is voluminous data in cause of info risk?
Higher volumes of transactions increase the likelihood of undetected errors
why do bus value the auditors assurance about financial statments being reasonalby complete, accurate, and unbiased?
because of the auditors independence fromt he client and knowledge of financial statement reporting matters
as a way to reduce info, what does “User verifies information” entail
The user may go to the business to verify the information.
what do stockholders and lenders who use financial statement look at to see whether or not the statement is reliable?
the auditors report
what is an 2example of a a user performing their own verification
1.IRS verifies bus and ind tax returns to determine whetther tax return filed reflect actual tax due 2. business going to buy another business and will use audit team to indepently very and evaluate key info of the prospective business
what is remoteness of info?
Decision makers do not have firsthand knowledge and must rely on information provided by others.
what is an 2example of a a user performing their own verification
1.IRS verifies bus and ind tax returns to determine whetther tax return filed reflect actual tax due 2. business going to buy another business and will use audit team to indepently very and evaluate key info of the prospective business
Information is provided by someone whose goals are inconsistent with those of the decision maker and may be biased. what kind of cause of info risk is this
Biases and motives of the provider
a user verifying info as a way to reduce info risk is often _____ and _____
costly impractical
what are the 4 causes of info risk?
- remoteness of info 2. biases and motives of the provider 3. voluminous data 4. complex exchange transactions
External auditors are engaged to provide assurance that the financial statements are reliable. what way of reducing info risk is this
auditied financial statments are provided
what is voluminous data in cause of info risk?
Higher volumes of transactions increase the likelihood of undetected errors
typically who engages the auditor to provide assurances to users that the financial statments are reliable? for private company? for public?
private- management public- audit committee
Transactions are increasingly complex and more difficult to record properly. Complex accounting standards are difficult to interpret and apply. what kind of cause of info risk is this
Complex exchange transactions
what are the 4 causes of info risk?
- remoteness of info 2. biases and motives of the provider 3. voluminous data 4. complex exchange transactions
T/F after comparing costs and benefits, bus managers and financial statment user by conclue best way to deal ith info risk is to have it remain reasonably high since it may be less expensive to do so that incur costs of reducing info risk
T
T/F when info is obtained form others, the likelihood of it being intentiaonally or not misstated increase what kind of cause of info risk is this?
T remoteness of info
T/F when info is obtained form others, the likelihood of it being intentiaonally or not misstated increase what kind of cause of info risk is this?
T remoteness of info
what is an example of Biases and motives of the provider in causes of info risk?
used care salesman. he wants to sell you want a good deal. these goals are inconsistent
Transactions are increasingly complex and more difficult to record properly. Complex accounting standards are difficult to interpret and apply. what kind of cause of info risk is this
Complex exchange transactions
Higher volumes of transactions increase the likelihood of undetected errors. what kind of cause of info risk is this
voluminous data
as a way to reduce info risk , what does “Audited financial statements are provided” mean?
External auditors are engaged to provide assurance that the financial statements are reliable.
