Module 1: Introduction to Auditing

Question 1

It is defined as an engagement in which a practitioner is engaged to issue or does an issue, a written communication that expresses a conclusion about the reliability of a written assertion that is the responsibility of another party

Answer 1

Attestation Services

Question 2

____ are professional services designed to improve the quality of information both the financial and non-financial that decision-makers use

Answer 2

Assurance Services

Question 3

What are the conceptual phases of a systematic audit?

Answer 3

1. Familiarization with the org’s business
2. Evaluating and testing internal controls
3. Assessing the reliability of financial data

Question 4

What is the product of the attestation function?

Answer 4

A formal written report that expresses an opinion about the reliability of the assertions contained in the financial statements.

Question 5

What is GAAS?

Answer 5

Generally Accepted Auditing Standards

Question 6

Auditing Standards are divided into three classes which are?

Answer 6

1. General Qualification Standards
2. Fieldwork Standards
3. Reporting Standards

Question 7

External audit is more or less correlated with?

Answer 7

Financial Audit

Question 8

In what situations can an external auditor rely on the work of the internal audit function of an organization?

Answer 8

When the internal audit function is an independent department, and only reports to the BOD’s audit committee.

Question 9

_______ is the probability that the auditor will render an unqualified (clean) opinion on FS that is materially misstated.

Answer 9

Audit Risk

Question 10

____ risk is associated with the unique characteristics of the business or industry of a client

Answer 10

Inherent RIsk

Question 11

T or F: Auditors can reduce the level of inherent risk through excellent controls

Answer 11

False.

Question 12

____ risk is he likelihood that the control structure is flaw because controls are either absent or inadequate to prevent or detect errors in the accounts.

Answer 12

Control Risk

Question 13

How can control risks be reduced?

Answer 13

Test of Internal Controls

Question 14

____ risk is the risk auditors are willing to accept that errors not detected or prevented by the control structure will also not be detected by the auditor

Answer 14

Detection Risk

Question 15

What do you call the acceptable level of detection risk used by the Auditor?

Answer 15

Planned detection risk

Question 16

What is the relationship between detection risk percentage and the number of substantive testing?

Answer 16

Inverse Relationship

Question 17

What is the first step in the Structure of an IT Audit?

Answer 17

Audit Planning

Question 18

What is a major part of the audit planning phase?

Answer 18

Audit Risk Analysis

Question 19

What do you usually do in the Audit Planning phase?

Answer 19

Find out the risks in the organization and determine what controls have been put in place to reduce these risks

Question 20

What is the second step of the IT audit structure?

Answer 20

Test of Controls

Question 21

At the conclusion of the tests of controls phase, the auditor must?

Answer 21

Assess the quality of the internal controls

Question 22

What is the third step in the IT Audit Structure?

Answer 22

Substantive Testing

Question 23

This step in the IT audit structure involves a detailed investigation of specific account balances and transactions.

Answer 23

Substantive Testing

Question 24

What are the four modifying assumptions that guide designers and auditors of internal controls?

Answer 24

1. Management Responsibility
2. Reasonable Assurance
3. Methods of Data Processing
4. Limitations

Question 25

Who is responsible for the establishment and maintenance of a system and internal controls?

Answer 25

the management

Question 26

What are the three levels of the Internal Control Model

Answer 26

1. Preventive - most cost-effective
2. Detective - identifies occurrences different from pre defined standards
3. Corrective - must be separate and not automed with detective controls

Question 27

Is a comprehensive and good practice setting reference model

Answer 27

IT Assurance Framework