Deck 1 Flashcards
What is audit risk?
The risk of expressing an inappropriate opinion on materially misstated FS.
Factors that determine sample size
- Tolerable deviation rate
- Acceptable risk of over reliance
- Expected deviation rate
- The size of a small population
What’s tolerable deviation?
Amount acceptable to the auditor w/o changing the assessed risk of material misstatement.
What does a Standard investment service publish?
Dividend records for all listed stocks
What’s the goal of performance materiality?
To reduce to an acceptably low level the probability that the sum of uncorrected and undetected misstatements exceeds the applicable materialty.
What are 3 risk assessment procedures? (Procedures that assess risks)
- Inquiries within the entity
- Analytical procedures
- Observation and inspection
Why are risk assessment procedures performed?
To obtain an understanding of the entity and its environment including internal control.
What’s the order of sufficiency? (Least to most)
- Inquiry 2. Observation 3. Inspection of documents 4. Reperformance of a control
Inquiry can be combined with other procedures
Elements of an engagement letter
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
When is an opinion not expressed on Supplementary information
When an adverse or a disclaimer of opinion was issued on the FS.
What’s included in a consulting service? (ARP)
- Analysis of an accounting system
- Review of clients business plan
- Preparation of information to obtain financing
To identify related party transactions an auditor should inspect
- Confirmations
- Minutes of meetings
- Any other necessary records or documents
FS Assertions: what is the benefit of proper approval of A/R?
provides assurance that A/R is collectible.
Do immaterial changes in accounting principles need to be recognized in audit report?
No
What do assurance services do?
Enhance decision making
T or F Consulting services provide information that results in better outcomes.
True.
T or F Consulting services provide information that results in better outcomes.
True.
Extension example
10 units x $10 per unit =$100.00
Footing example
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
