Chapter 6

Question 1

purpose of audit

Answer 1

is to provide f/s users with an opinion by the auditor on whether the f/s are presented fairly in all material respects in accordance with the applicable financial accounting framework

Question 2

auditors

Answer 2

verify that the f/s are free of material misstatement

Question 3

reasonable assurance

Answer 3

measure of the level of certainty that the auditor has obtained at the completion of the audit

Question 4

error

Answer 4

an unintentional misstatement of the financial statements,

Question 5

fraud

Answer 5

intentional misstatement

Question 6

misappropriation of assets

Answer 6

defalcation or employee fraud

ex: employee steals customer money meant for purchase

Question 7

fraudulent financial reporting

Answer 7

management fraud

Question 8

professional skepticism

Answer 8

attitude auditors take in audits

Question 9

noncompliance with laws and regulations

Answer 9

illegal acts

Question 10

financial statement cycles

Answer 10

sales and collection cycle
acquisition and payment cycle
payroll and personnel cycle
inventory and warehousing cycle
capital acquisition and repayment cycle

Question 11

transaction related audit objectives

Answer 11

these are objectives that tell if a transaction is properly recorded

Question 12

balance related audit objectives

Answer 12

objectives that verify if account balances are correct

Question 13

presentation and disclosure related audit objectives

Answer 13

objectives that verify that all items are disclosed correctly and fully

Question 14

management assertions

Answer 14

implied or expresses representations by management about classes of transactions and the related accounts and disclosures in the financial statements

Question 15

occurence

Answer 15

did it really happen?

Question 16

completeness

Answer 16

is everything included?

Question 17

accuracy

Answer 17

are things recorded at the correct amount

Question 18

classification

Answer 18

is everything recorded in the right account

Question 19

cutoff

Answer 19

are transactions recorded in the proper period

Question 20

existence

Answer 20

do the items really exist?

Question 21

valuation and allocation

Answer 21

are things valued right?

Question 22

rights and obligations

Answer 22

do they own the assets?

Question 23

occurrence and rights and obligation

Answer 23

did the transactions that occurred belong to the company?

Question 24

assertions about classes of transactions and events

Answer 24

occurrence
completeness
accuracy
classification
cutoff

Question 25

assertions about account balances

Answer 25

existence
completeness
valuation and allocation

Question 26

assertions about presentation and disclosure

Answer 26

occurrence and rights and obligations
completeness
accuracy and valuation
classification and understandability

Question 27

relevant assertions

Answer 27

using the correct assertions for the correct accounts

Question 28

phases of the audit process

Answer 28

1. plan and design an audit approach
2. perform tests of controls and substantive tests of transactions
3. perform analytical procedures and tests of detail of balances
4. complete the audit and issue an audit report

Question 29

tests of controls

Answer 29

testing of controls

Question 30

substantive tests of transactions

Answer 30

testing substantial transactions

Question 31

analytical procedures

Answer 31

consists of analyzing financial and non-financial data

Question 32

tests of details of balances

Answer 32

designed to test for monetary misstatements in the balances in the financial statements