Deck 1

Question 1

What is audit risk?

Answer 1

The risk of expressing an inappropriate opinion on materially misstated FS.

Question 2

Factors that determine sample size

Answer 2

1. Tolerable deviation rate
2. Acceptable risk of over reliance
3. Expected deviation rate
4. The size of a small population

Question 3

What’s tolerable deviation?

Answer 3

Amount acceptable to the auditor w/o changing the assessed risk of material misstatement.

Question 4

What does a Standard investment service publish?

Answer 4

Dividend records for all listed stocks

Question 5

What’s the goal of performance materiality?

Answer 5

To reduce to an acceptably low level the probability that the sum of uncorrected and undetected misstatements exceeds the applicable materialty.

Question 6

What are 3 risk assessment procedures? (Procedures that assess risks)

Answer 6

1. Inquiries within the entity
2. Analytical procedures
3. Observation and inspection

Question 7

Why are risk assessment procedures performed?

Answer 7

To obtain an understanding of the entity and its environment including internal control.

Question 8

What’s the order of sufficiency? (Least to most)

Answer 8

1. Inquiry 2. Observation 3. Inspection of documents 4. Reperformance of a control

Inquiry can be combined with other procedures

Question 9

Elements of an engagement letter

Answer 9

1 Objective and scope of the Audit
2 Responsibilities of mgmt & auditor
3 Inherent limitations of the audit and internal control
4 Financial reporting framework
5 Expected form & content of audit reports

Question 10

When is an opinion not expressed on Supplementary information

Answer 10

When an adverse or a disclaimer of opinion was issued.

Question 11

What’s included in a consulting service?

Answer 11

1. Analysis of an accounting system
2. Review of clients business plan
3. Preparation of information to obtain financing

Question 12

To identify related party transactions an auditor should inspect

Answer 12

1. Confirmations
2. Minutes of meetings
3. Any other necessary records or documents

Question 13

FS Assertions: what is the benefit of proper approval of A/R?

Answer 13

provides assurance that A/R is collectible.

Question 14

Change in accounting principles

Answer 14

Immaterial Changes in accounting principles do not need to be recognized in the auditors report.

Question 15

What do assurance services do?

Answer 15

Enhance decision making

Question 16

T or F Consulting services provide information that results in better outcomes.

Answer 16

True.

Question 17

T or F Consulting services provide information that results in better outcomes.

Answer 17

True.

Question 18

Extension example

Answer 18

10 units x $10 per unit =$100.00

Question 19

Footing example

Answer 19

Adds up all extension cost plus any extra cost to get invoice total aka footing.

10 units x $10 per unit =$100
20 units x $5 per unit = $100
40.00 for shipping
18.00 for tax
Invoice total is $258
Footing cost is $258