Exam 2 Menti Flashcards
which of the following would most likely cause a CPA to not accept a new client?
the client is not willing to make all financial records available
the scope and nature of an auditor’s contractual obligation is set forth in the:
engagement letter
which concern is usually so serious that an auditor might conclude that a financial statement audit cannot be conducted?
the integrity of management is suspect
the use of analytical procedures is required during the _______ and ______ stages
planning and completion
true/false
the use of analytical procedures is required during substantive testing
false
audit documentation provides evidence that:
the audit was performed in accordance with GAAS
detection risk differs from control and inherent risk in that detection risk:
can be changed at the auditor’s discretion
as the acceptable level of detection risk increases an auditor may:
decrease substantive testing
an auditor assess control risk because:
it affects the level of detection risk the auditor may accept
what would an auditor most likely use to determine their preliminary judgement about materiality?
the entity’s annualized financial statements
when an auditor increases the assessed level of control risk because certain control activities were determined to be ineffective, the auditor would:
increase the extent of tests of details
an audit plan cannot be finalized until:
understanding of the entity and its environment has been completed
what procedure should an auditor most likely include in the planning of an audit of financial statements?
determining the need for specialized skills
which risk increases when substantive analytical procedures are performed at an interim date?
detection risk
some account balances are the results of complex calculations. the susceptibility to material misstatements in these types of accounts is defined as:
inherent risk
what is a factor in the control environment?
management’s philosophy and operating style
what is a component of internal control?
risk assessment
what does not reduce the need for sufficient appropriate evidence?
a lower acceptable level of detection risk
a rectangle on a flowchart typically depicts:
computerized process
the responsibility to establish, maintain, and monitor internal controls is:
mangagement’s
audit evidence has to be _______ according to audit standards
appropriate
what is an inherent limitation in internal control?
faulty human judgement
to obtain audit evidence about control risk, an auditor selects from a variety of techniques including:
inquiry
which risk is not a component of internal control?
inherent risk
what provides the least assurance about the effectiveness of an internal control activity?
preparation of a system flowchart
true/false
as part of understanding internal control, an auditor is required to obtain knowledge about the operating effectiveness of internal control
false
the auditor relies on _________ to reduce the risk that the audit will not detect material misstatements
substantive tests
an auditor discovered a material weakness in internal control. the auditor will most likely express an:
adverse opinion on internal controls
