Chapter 7 Flashcards
What happens if auditors don’t plan?
Time might be wasted doing the wrong work
Really important work might not be done at all
Wrong conclusion might be drawn
What is an audit pack?
- positives and negatives also?
Comprises of pre printed schedules and forms to assist the completion, with the planning.
If used audits will be technically compliant, designed to be cost effective and user friendly
must make it specific to client and not overlook sections of the audit
What is material?
if its omission or misstatement could influence economic decisions of users taken on basis of FS
dependent on size of item or error judged in particular circumstances of omission or misstatement
so gives a threshold or cut off point than being primarily qualitative characteristic which info must have if its useful
What is performance materiality?
Amount or amounts set by auditor at less than materiality for FS as whole to reduce an appropriately low level the probability aggregate uncorrected misstatements exceed materiality for FS as whole or if applicable classes of transactions, account balances or disclosures
How to compute the level of materiality
Revnure 0.5-1
Profit before tax 5-10
Gross Assets 1-2
(in percentages)
What is ISA 315?
Identifying ad assessing the risk of material misstatement through understanding of entity and its environment
What is ISA 570?
Going concern deals with preparation to the FS
What are some examples that going concern symptoms?
- Net liability or net current liability position
– Fixed-term borrowings approaching maturity without realistic prospects of renewal or repayment, or excessive reliance on short-term borrowings to finance long-term assets
– Indications of withdrawal of financial support by creditors
– Negative operating cash flows indicated by historical or prospective financial statements
– Adverse key financial ratios
– Substantial operating losses or significant deterioration in the value of assets used to generate cash flows
– Arrears or discontinuance of dividends
– Inability to pay creditors on due dates
– Inability to comply with terms of loan agreements
– Change from credit to cash-on-delivery transactions with suppliers
– Inability to obtain financing for essential new product development or other essential investments
– Management intentions to liquidate the entity or to cease operations
– Loss of key management without replacement
– Loss of a major market, key customer(s), franchise, license, or principal supplier(s)
– Labour difficulties
– Shortages of important supplies
– Emergence of a highly successful competitor
– Non-compliance with capital or other statutory requirements
– Pending legal proceedings against the entity that may, if successful, result in claims that the entity is unlikely to be able to satisfy
– Changes in law or regulation or government policy expected to adversely affect the entity
– Uninsured or underinsured catastrophes when they occur
What is cloud computing?
A model for enabling ubiquitous, convent on demande network access to shared pool of configurable computing resources that rapidly provisioned and released with minimal management effort or service provider interaction.
What are the most significant cyber risks an organisations IT systems encounter?
Human threats fraud Deliberate sabotage Viruses and other corruptions Malware Denial of service attack
What are some IT security controls?
prevention detection deterrence recovery procedures correction procedures threat avoidance
What are some ways to combat IT risks and security?
Business continuity planning Systems access control Systems development and maintenance Physical and environmental security Compliance Personnel security Security organisation Computer and network management Asset classification and control Security policy
