Chapter 1 SB HW Flashcards
When business owners hire others to manage their business, the demand for auditing can be understood as the need for ______.
accountability
What are the three fundamental concepts of a financial statement audit?
Audit risk, evidence, and materiality
True or false: Before accepting a new audit client, the auditor is required to conduct a background check on top management.
False
When planning an audit, the audit team must determine materiality and make a preliminary analysis of the entity’s ______ to determine the risk of material misstatement (RMM).
business risks
The end product of an auditor’s work is the ______.
audit opinion
Auditing helps one understand how to evaluate _______.
assertions
Auditing focuses on learning the _______ and _______ skills necessary to evaluate the relevance and reliability of financial information.
analytical, logical
Auditing is more _______ in nature than financial accounting.
conceptual
In 1926, ____% of companies on the NYSE were audited by independent auditors.
82
Why is auditing demanded?
It plays a valuable role in monitoring contractual relationships.
Purchasing the assurance provided by an audit ______ the cost of capital for a firm.
significantly reduces
Predictive audit data analytics combine what three data sources to help identify off information?
Firm, industry, and market data
The body of an audit report begins with a section that indicates the _____(3 parts).
- FS covered by the report
- Name of the company being audited
- Auditors opinion regarding fairness of FS
The focus of the auditor’s evidence collection efforts is ______.
financial statement assertions
Accounting professionals perform various services that provide assurance about the _____ and _____ of information given by one party to another.
relevance, reliability
Oral or visual information as well as paper or electronic documents that originate either within or outside the organization are all types of ________.
audit evidence
Learning auditing essentially helps to understand how to gather and assess evidence so you can evaluate ________ made by others.
assertions
Materiality and sample size have what kind of relationship?
Inverse relationship
If the client is a public, rather than a private company, the assessment of internal controls will be more or less thorough?
more
In order to reach and justify a conclusion on the fairness of the financial statements, an auditor must obtain evidence that is ______.
appropriate and material
What is the most common type of audit report/opinion issued?
Unqualified
The paragraph containing the auditor’s opinion emphasizes the concept of _______.
materiality
For an audit report to be unqualified ______(4 parts).
- Auditor must be independent
- Audit must be done in accordance with applicable standards
- No significant limitations on procedures
- FS must be free from material departures from GAAP
Does management need to completely agree with findings of audit for an unqualified opinion to be issued?
No
Rapid advances in electronic technologies used by many businesses ______ (2 parts).
- Facilitates efficient corroboration of data reliability
- Creates automatic audit trails
Audit data analytics is using analysis,______, and _______
to discover and analyze patterns, anomalies, and other information in data in the context of the audit.
modeling, visualization
A way to automate mundane tasks that is gaining broader acceptance is ______.
robotic process automation (RPA)
The auditors assessments of ______ and _______ influence the nature, timing and extent of audit evidence to be gathered.
materiality, audit risk
