Chapter 3 SB HW Flashcards
Auditors can reduce audit risk to an acceptably low level by ______.
obtaining an understanding of the entity and its environment
Auditors should attempt to identify all ______ because transactions with them may not be at “arm’s length”.
related parties
What should a public accounting firm determine before accepting new client?
- Capabilities to perform the audit?
- Complies with legal and ethical requirements?
In documenting the overall audit strategy and audit plan, auditors should document the ___________ of the audit tests.
extent, timing, and nature
Risk assessment, benchmarking, and recommendations based on assessment of business risk are all examples of _________.
value-added services
Overall responsibility for an audit engagement rests with the ______.
engagement partner
The first phase of the audit process that relates to audit planning is ______.
client acceptance and continuance
When should the evaluation of client continuance take place?
When a significant event occurs or near the completion of the audit
What are the three preliminary engagement activities?
- Determine engagement team requirements
- Ensure team and firm is in compliance with independence/ethics
- Establish understanding with entity
Both the PCAOB and ASB follow ______ perspective in considering what is material.
the user’s
Steps that should be performed as part of audit planning activities include ______(3 parts).
- Establish materiality
- Assess business risk
- Consider violations of laws and regulations
During the documenting stage, the auditor ______(3 parts).
- Compile knowledge about business objectives/strategies
- Ensure identified risks are addressed
- Records how entity managing its risks
According to ASB standards, when assessing materiality, users are assumed to ______(3 parts).
- Make appropriate economic decisions
- Recognize inherent uncertainties
- Understand FS are prepared with materiality
FS users are assumed to have a _________ knowledge of business and accounting.
reasonable
Consideration of ____________ during the planning process may identify opportunities to improve client service.
value-added services
Can auditors who audit public companies offer consulting/value-added services to their clients?
Yes, but there are limitations
The amount of overall materiality used to plan and perform audit procedures at the account or disclosure level is called _______.
tolerable misstatement
When auditing a company with multiple locations, the amount of audit attention devoted to various locations depends upon the ______.
risk of material misstatement
Examples of tests of controls include ______(4 parts).
- Inquiry of mgmt
- Inspecting documents
- Observation of controls
- Reperformance
The categories of substantive procedures are ______.
- Test of details
- Substantive analytical procedures
Substantive analytical procedures analyze _______.
plausible relationships between financial & nonfinancial
Operating effectiveness is checked using ______.
test of controls
Audit data analytics use ______________.
analysis, modeling, and visualization
Gaining an understanding of the business environment is done to assess __________.
business risks
