Chapter 7 SB HW Flashcards
The risk that a misstatement could result in a material misstatement of the financial statements is called a ___________ risk.
financial reporting
Written representations from management related to the audit of ICFR include management ______.
- Responsibility for establishing and maintaining effective ICFR
- Conclusion about the effectiveness of the entity’s ICFR as of a specified date
The auditor’s report on the effectiveness of internal control must ______.
- be addressed to the shareholders and BOD
- Contain the basis for the auditor’s opinion
The evaluation of the ___________ effectiveness of a control considers whether the person performing the control possesses the necessary authority and competence to perform the control effectively.
operating
A major premise of AS 2201 is that
_____ assessment underlies the entire audit of ICFR.
risk
Entity-level controls that require specific evaluation by the auditor are the ______.
- Control environment
- Period-end financial reporting process
The best way to identify potential sources of misstatements is often ______.
performing walkthoughs
The financial statement amounts or total of transactions exposed to the deficiency, and the volume of transactions involved or expected, are factors that affect whether the magnitude of a misstatement might result in a _______.
material weakness
When an entity has a material weakness, it should take steps to correct it, which is referred to as ____________.
remediation
Unless a longer period of time is required, PCAOB standards require the auditor to retain audit documentation for the ICFR and financial statement audit for ______ years.
7
The phrase “All material respects” means that the entity’s ICFR ______.
is free of any material weakness
In addition to material weaknesses and significant deficiencies, the auditor should communicate, in writing, to management all ________ deficiencies identified during the audit.
control
If the auditor discovers fraud involving senior management while auditing ICFR, the auditor must communicate the matter directly to the ______.
audit committee
Disadvantages of GAS include ______.
- Data must be electronic
- Limited ability to verify programming logic
Creating _______ can be very time consuming.
test data
Test data _________.
- Should include both valid and invalid data
- Ensures the accuracy of computer processing of transactions
A control issue does not rise to the level of control deficiency if the likelihood is ______.
remote
When it comes to ICFR documentation, management should ______.
focus on controls deemed adequate to address financial reporting risk
Controls that are important to the auditor’s conclusion about whether the entity’s controls sufficiently address the assessed risk of misstatement are often referred to as _______ controls.
Key
Audit procedures to test and evaluate the design effectiveness of controls might also provide some evidence about _____________.
Operating effectiveness
