Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

ACCT 425 > Lec 7 > Flashcards

Lec 7 Flashcards

1
Q

What does CAS 500 say

A

Auditor should design and perform audit in such a way where they obtain sufficient and appropriate evidence to base an opinion on

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

what do sufficient and appropriateness relate to?

A

quality and quantity

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Types of techniques

A

recalculation/reperformance, observation, confirmation, enquiry, inspection, analysis

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

what does it mean when evidence is low quality and what is the remedy

A

it means that it is nit sufficient and needs to be suplemented by high quality evidence

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

what is recalculation/reperformance

A

recalculate something that was previously done by the client

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

is recalculation high quality evidence?

A

yes

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

what are examples of recalculations

A

bank reconciliations or AR aging schedule

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

what is observation technique and give example

A

observing the actions of an employee at work. this could be the CFO signing cheques

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

is observation high or low quality and why

A

it is low quality because the actions of people can change when they know they are being observed - you can only be sure that this is being done this way while you are observing

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

what are the types of confirmation

A

positive, negative, blank, legal, bank, specific balance

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

does confirmation need to be performed on every audit

A

it SHOULD be performed, not must be - issue are with the feasibility of checking high volume and low dollar amount A/R

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

what should you do if you cannot get confirmation

A

need to have documentation explaining your reasoning on why you do not and what actions you took

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

are confirmations high or low quality and why

A

all are high quality besides negative confirmation because it does not require a reply

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

what are positive confirmations

A

an inquiry that requires the customer to respond, confirming the accuracy of an item - send inquiry twice and then seek other ways

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

what is the main use of positive confirmation

A

to proof the existence of A/R

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

what does the positive confirmation of 0 balance A/R test

A

it tests the assertion of completeness

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

what is negative confirmation

A

the inquiry for responded to only reply if they do not agree with the balance

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

what is a blank confirmation

A

positive confirmation where the respondent has to fill in the amount

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

what is legal confirmation

A

confirmation regarding any potential law suit - need to pay law firm

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

what is a bank confirmation

A

confirming the accounts and securities
all bank confirmations are blank confirmations

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

what are specific balance confirmation

A

done when auditee has business with government and a specific amount is check with each government department

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

how is valuation for A/R measured

A

its collectability

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

what are the two types of inspections

A

vouching and tracing

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

what is the process of vouching and what assertion does it prove

A

it is when you go from the source document to the proof - proves existence

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

example of vouching

A

going from a document to check if the inventory on the floor matches

26
Q

when is vouching high quality and low quality

A

high quality when the document is prepared by a third party and low quality when prepared in house

27
Q

what is the process of tracing and what assertion does it prove

A

tracing is when you go from inspecting the asset to confirming in on the document - this proves the assertion of completeness

28
Q

example of tracing

A

when you count inventory and then ensure that everything is on the documents

29
Q

what is the difference between observation and inspection

A

observation is when you look at a process while inspection involves looking at documents

30
Q

what is the difference between substansive tests and internal control tests

A

substantive tests must be done every audit using the 6 methods of evidence while internal control tests do not need to be done but only need to be understood

31
Q

how is valuation for inventory measured

A

on how salable it is using the lower cost or market method

32
Q

what is the technique of enquiry and what strength of evidence is it

A

when you take statement by personnel of client - it is low quality evidence because they can be bias

33
Q

what is the technique of analysis

A

rough calculations to help form an opinion

34
Q

how does analysis differ from recalculation

A

recalculation is precise while analysis is approximate

35
Q

what % of enquiry and analysis do soft procedures account for

A

45 to 50

36
Q

what happens to misstatements caught by soft procedures?

A

they will be quantified by detailed procedures

37
Q

where is information for continuing audits kept

A

it is kept at with the permanent files

38
Q

what does it mean for evidence to be sufficient

A

it means that it has to be relevant and reliable

39
Q

what does it mean for evidence to be relevant

A

it means that it must prove at least one of the assertions

40
Q

what is the rank of reliability from most reliable to least

A

1 - auditor direct and personal knowledge
2 - external evidence
3 - external internal evidence
4 - internal evidence
5 - analysis
6 - spoken or written representation

41
Q

what is auditor direct knowledge in terms of reliability

A

knowledge that is based on recalculations and inspections

42
Q

what is external evidence in terms of reliability

A

documented evidence obtained from third parties

43
Q

what is external-internal in terms of reliability

A

documents that were created externally bur processed and held internally

44
Q

what is internal evidence in terms of reliability

A

evidence produced from client - can be used a lot if client internal control systems are proven to be satisfactory

45
Q

what is analysis evidence in terms of reliability

A

used for risk identification and attention directing.
of data is specific it is reliable. if procedure is general, it is not reliable

46
Q

what is spoken word evidence in terms of reliability

A

evidence that comes from directors or employees from enquiry - this evidence NEEDS to be backed by a second source

47
Q

when is evidence considered sufficient

A

when it is enough data to support and persuade towards argument

48
Q

what does more evidence do to detection risk

A

reduces it

49
Q

can audit risk be affected by auditor?

A

no, only detection risk can

50
Q

what is the audit program

A

most specific planning document and it outlines the specific procedures that will be used to guide the work

51
Q

what is the nature, timing and extent in the audit program

A

nature - what type of evidence will be used
timing - when will procedures be performed
extent - size of sample

52
Q

what are the two types of audit programs

A

internal control and balance audit

53
Q

what is internal control in terms of the audit program

A

specific procedures used to obtain understanding of the clients control system

54
Q

what is balance-based in terms of the audit program

A

procedures to get direct evidence on assertions made and balances of accounts

55
Q

are permanent files in hard copy or online

A

hard copy and kept for multiple years

56
Q

what is given to the proceeding auditor

A
  • trial balances
  • evidence you have done the audit proceedings properly
57
Q

what are some basic rules on picking who to enquire

A
  • pick a person who is knowledgeable about the topic
  • pick a person who has not control over the account or incentive
58
Q

what is an example of picking the right person to enquire

A

picking the production manager to ask about product warranties

59
Q

what might the permanent working file contain

A
  • incorporation details
  • long term contracts
  • management contracts
  • continuity contracts
60
Q

would the predecessor auditor share material such as the planning memo and risk assessments

A

no, those are the property of the previous auditor and they do not have to share

61
Q

what are the substantive tests

A

enquiry, reperlfromance/calculation, confimation, inspection, analysis, observation

62
Q

what are control tests

A

observation, reperformance, enquiry, inspections

ACCT 425 (21 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions