Chapter 13: Overall Audit Plan and Audit Program Flashcards
What are the five types of tests to determine if the financial statements are fairly stated?
risk assessment procedures tests of controls substantive tests of transactions analytical procedures tests of details and balances
Which test type does this describe:
procedures to obtain an understanding of the entity and its environment, including internal control, to assess the risk of material misstatement in the financial statement
risk assessment procedures
What procedures do you to assess risk?
update and evaluate the auditor’s previous experience with the entity
make ______ of client personnel
Examine ______ and ______
______ entity activities and operations
Perform walkthroughs of the ________ system
inquiries
documents and records
observe
accounting
Which test type does this describe:
audit procedures to test the effectiveness of controls in support of a reduced assessed control risk
test of controls
How do you go about testing controls? Make inquiries of appropriate client personnel Examine documents, records, and reports Observe \_\_\_\_\_-related activities \_\_\_\_\_\_\_\_ client procedures
control
reperform
Which test type does this describe:
Procedures designed to test for dollar misstatements directly affecting the correctness of financial statement balances
substantive test of transactions
The purpose of substantive tests of transactions is to determine whether all ____ transaction related audit objectives have been satisfied for each class of transactions.
six
Which test type does this describe:
comparisons of recorded amounts to expectations developed by the auditor
analytical procedures
The two most important purposes of analytical procedures in the audit of account balances are to:
1) indicate the presence of possible __________ in the financial statements
2) to provide _______ evidence
misstatement
substantive
Which type of test does this describe:
focus on the ending general ledger balances for both balance sheet and income statement accounts, but the primary focus is on balance sheet accounts
tests of details and balances
Tests of ending balances are essential because the evidence is usually obtained from a source __________ of the client.
independent
Tests of details and balances help establish the monetary correctness of the accounts they relate to and therefore are _______ tests.
substantive
To select which types of tests to perform, it varies by client and is a mater of professional judgment, but some items to consider are: 1) 2) 3) availability of \_\_\_\_\_\_ 4) \_\_\_\_\_\_\_\_\_\_ of internal controls
risk
costs
evidence
effectiveness
For public companies, computer-performed controls must be tested if the auditor considers them to be _____ _______ for reducing the likelihood of _________ _________ in the financial statements.
key controls
material misstatements
After the auditor uses risk assessment procedures to determine the appropriate emphasis on each of the other four types of tests, the specific audit procedures for each type of test must be designed. These audit procedures are then combined to form the ______ ______.
audit program
The audit program for most audits is designed in 3 parts, what are they?
Part 1: tests of controls and substantive tests
Part 2: analytical procedures
Part 3: tests of details and balances
The four step approach to designing control and substantive tests are:
1) apply ________-_________ audit objectives to a class of transactions
2) Identify _____ _______ and make a preliminary assessment of control risk
3) Design tests of controls
4) design substantive tests of transactions
transaction-related
key controls
Because substantive analytical procedures are _________ ___________ , many auditors perform them on all audits.
relatively inexpensive
Analytical procedures performed during substantive testing are usually more focused and extensive than those done during ________.
planning
In designing tests of details of balances for accounts receivable:
1) identify client business ______ affecting accounts receivable
2) set performance materiality and asses _____ risk for accounts receivable
3) assess ______ risk for sales and collection cycle
4) design and perform tests of controls and substantive tests of transactions for sales and collection cycle
5) Design and perform ________ _______ for accounts receivable balances
6) design tests of details of accounts receivable balance to satisfy balance-related audit objectives
1) risk
2) inherent
3) control
5) analytical procedureds
Summary of the Audit process:
Phase 1- ______ and design and audit approach
Phase 2- Perform tests of _______ and substantive tests of transactions
phase 3-perform _______ ________ and tests of _______ and ________
phase 4- complete the audit and issue an ______ ______.
plan
controls
analytical procedures, details and balances
audit report
in planning and designing the audit approach:
1) accept client and perform initial planning
2) understand the client’s _______ and ______
3) assess client business ______
4) Perform preliminary ________ _______
2) business and industry
3) risk
4) analytical procedures
In planning and designing the audit approach:
5) set _______ and assess acceptable ______ risk and _____ risk
6) understand _______ ______ and assess control risk
7) gather information to assess _____ risks
8) develop overall audit _______ and audit _______
5) materiality, audit, inherent
6) internal control
7) fraud
8) plan, program
In phase 2, performing tests of controls and substantive tests of transactions, if you plan to reduce assessed level of control risk, then you?
perform test of controls and substantive test of transactions and then asses likelihood of misstatements
