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Audit > Final Review II > Flashcards

Final Review II Flashcards

1
Q

What is the audit strategy

A

outlines the scope of the audit engagement,
reporting objectives
timing of the audit
req communications
factors that determine the focus of the audit

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2
Q

What is the audit plan?

A

outlines the nature, extent, and timing of the procedures to be performed during the audit :

  • risk assessment
  • further audit procedures
  • other audit procedures
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3
Q

What is internal control

A

process to provide assurance that an entitys objectives will be achieved

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4
Q

What are the 5 components of internal control?

A
  • control environment
  • risk assessment
  • information and communication systems
  • monitoring
  • existing control activities
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5
Q

What is existing control activities and what are the key points?

A

policies and procedures est to ensure that mgmt objectives are carried out
PAID TIPS

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6
Q

What is PAID TIPS

A
  • Prenumbering documents
  • authorization of transactions
  • independent checks to maintain asset accountability
  • documentation
  • timely and appropriate performance reviews
  • information processing controls
  • physicals controls for safeguarding assets
  • segregation of duties
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7
Q

How is a service organization related to user entity’s IC

A

considered to be part of user entity’s information system when such services affect initiation, execution, processing or reporting of the user transactions

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8
Q

What are the 2 types of user reports from a service organization?

A
  • report on controls placed in operation

- report on controls placed in operation and tests of operating effectiveness

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9
Q

What is the auditors use of IT on the audit

A

effects both the eval and gathering evidence but audit objectives remain the same

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10
Q

What are computer assisted auditing techniques

A

auditing through the computer

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11
Q

What is transaction tagging

A

electronically marks a transaction and allows the auditor to follow it though the clients system

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12
Q

what is an embedded audit module?

A

application program collects transaction data for the auditor. auditor must be involved in program design

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13
Q

What is test data (deck)

A

uses application program to process test data the results of which are already known

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14
Q

What is integrated test facility?

A

test data is mixed with live data

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15
Q

What is a parallel simulation

A

auditor reprocesses clients live data and compares results

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16
Q

what is generalized audit software packages

A

auditor to perform test of controls and substantive tests directly on the clients system

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17
Q

What are some IT risks

A
  • potential reliance on inaccurate
  • loss of data
  • unauthorized changes to data
  • failure to make req changes
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18
Q

What are some IT benefits ?

A
  • accurate and consistent processing
  • timeliness
  • facilitation of data analysis
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19
Q

When should fraud be reported to 3rd parties?

A
  • to SEC in order to comply with certain legal and regulatory req.
  • successor auditor
  • in response to a subpoena
  • to a funding agency
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20
Q

What is audit risk

A

auditor may unknowingly fail to modify the opinion on materially misstated FS

21
Q

What is the risk of material misstatement?

A

IRCRDR

22
Q

What is inherent risk?

A

susceptibility of material misstatement assuming no related controls

23
Q

What is control risk?

A

material misstatement will not be prevented or detected on a timely basis

24
Q

what is detection risk?

A

auditor will not detect material misstatement

25
Q

What is the effect on DR when risk of material misstatement is low

A
  • higher acceptable level of DR

- lower NET substantive tests

26
Q

What is the effect on DR when risk of material misstatement is high

A
  • lower acceptable level of detection risk

- higher NET substantive tests

27
Q

What procedures must auditor perform to assess and respond to risk?

A
  • obtain an understanding of the entity and its environment
  • assess RMM
  • respond to assess risk
  • eval audit evidence
28
Q

what should an auditor understand for risk assessment?

A
  • financial performance
  • internal control
  • PCAOB requires understanding of selection and application of accounting principles
29
Q

what items does mgmt make assertion about?

A

account bal., presentation and disclosure

30
Q

What are the 6 main financial stmt assertions ?

COVERU

A
  • completeness
  • Cutoff
  • valuation, allocation, and accuracy
  • existence and occurance
  • rights and obligations
  • understandability
31
Q

What is completeness?

A

acct bal., transaction and disclosures that should have been recorded are recorded

32
Q

what is cutoff?

A

transactions are recorded in correct acct period

33
Q

what is valuation, allocation and accuracy?

A

acct bal., transaction, and disclosures are recorded fairly and at appropriate amounts

34
Q

What is existence and occurrence?

A

account bal. exist and have been recorded

35
Q

What are rights and obligations?

A

entity controls the rights to the asset

36
Q

what is understandability and classification?

A

transactions have been recorded in the correct accts

37
Q

What are the relevant assertions for transactions and events?

A
  • completeness
  • cutoff
  • accuracy
  • classification
  • occurrence
38
Q

what are the relevant assertions for acct balances

A
  • completeness
  • allocation and valuation
  • rights and obligations
  • existence
39
Q

what are the relevant assertions for presentation and disclosures?

A
  • completeness
  • understandability and classification
  • rights and obligations
  • valuation and accuracy
40
Q

what are some of the overall responses to assessed risk

A
  • communicate to audit team an increased need for professional skepticism
  • staff with more experience or skill
  • increase supervision
  • incorporate more unpredictability
  • changes to NET of tests
41
Q

When should there be separate materality of classes of transactions?

A

when it could influence economic decision of users

42
Q

What can auditor not share with internal auditor?

A
  • responsibility for audit decisions

- issuing the audit report

43
Q

What are the critical factors an independent auditor should consider about internal auditor

A
  • competence of internal audit function (education, professional certification, quality of audit documentation
  • objectivity of internal auditor (org level)
  • application of systematic and disciplined approach
44
Q

What is the impact of the use of a specialist on audit report

A

-indicate that the reference to the specialist in the report does not reduce the auditor responsibility

45
Q

What are audit procedures for related parties ?

A
  • companies procedures to identify related party
  • inquiry of mgmt
  • filings with SEC
  • review material transaction
46
Q

What are mgmts responsibility for FV measurements

A

-making FV measurements and disclosures

47
Q

what are auditors responsibility for FV measurements

A

auditor tests measurements and disclosures

48
Q

What should auditor verify in regards to accounting estimates?

A
  • appropriate practices
  • estimates are reasonable
  • presented in conformity with GAAP
  • properly disclosed

Audit (6 decks)

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