Chapter 6 Flashcards

1
Q

purpose of audit

A

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

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2
Q

auditors

A

verify that the f/s are free of material misstatement

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3
Q

reasonable assurance

A

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

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4
Q

error

A

an unintentional misstatement of the financial statements,

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5
Q

fraud

A

intentional misstatement

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6
Q

misappropriation of assets

A

defalcation or employee fraud

ex: employee steals customer money meant for purchase

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7
Q

fraudulent financial reporting

A

management fraud

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8
Q

professional skepticism

A

attitude auditors take in audits

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9
Q

noncompliance with laws and regulations

A

illegal acts

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10
Q

financial statement cycles

A
sales and collection cycle
acquisition and payment cycle
payroll and personnel cycle
inventory and warehousing cycle
capital acquisition and repayment cycle
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11
Q

transaction related audit objectives

A

these are objectives that tell if a transaction is properly recorded

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12
Q

balance related audit objectives

A

objectives that verify if account balances are correct

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13
Q

presentation and disclosure related audit objectives

A

objectives that verify that all items are disclosed correctly and fully

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14
Q

management assertions

A

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

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15
Q

occurence

A

did it really happen?

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16
Q

completeness

A

is everything included?

17
Q

accuracy

A

are things recorded at the correct amount

18
Q

classification

A

is everything recorded in the right account

19
Q

cutoff

A

are transactions recorded in the proper period

20
Q

existence

A

do the items really exist?

21
Q

valuation and allocation

A

are things valued right?

22
Q

rights and obligations

A

do they own the assets?

23
Q

occurrence and rights and obligation

A

did the transactions that occurred belong to the company?

24
Q

assertions about classes of transactions and events

A
occurrence
completeness
accuracy
classification
cutoff
25
Q

assertions about account balances

A

existence
completeness
valuation and allocation

26
Q

assertions about presentation and disclosure

A

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

27
Q

relevant assertions

A

using the correct assertions for the correct accounts

28
Q

phases of the audit process

A
  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
29
Q

tests of controls

A

testing of controls

30
Q

substantive tests of transactions

A

testing substantial transactions

31
Q

analytical procedures

A

consists of analyzing financial and non-financial data

32
Q

tests of details of balances

A

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