Module 1: Introduction to Auditing Flashcards
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
Attestation Services
____ are professional services designed to improve the quality of information both the financial and non-financial that decision-makers use
Assurance Services
What are the conceptual phases of a systematic audit?
- Familiarization with the org’s business
- Evaluating and testing internal controls
- Assessing the reliability of financial data
What is the product of the attestation function?
A formal written report that expresses an opinion about the reliability of the assertions contained in the financial statements.
What is GAAS?
Generally Accepted Auditing Standards
Auditing Standards are divided into three classes which are?
- General Qualification Standards
- Fieldwork Standards
- Reporting Standards
External audit is more or less correlated with?
Financial Audit
In what situations can an external auditor rely on the work of the internal audit function of an organization?
When the internal audit function is an independent department, and only reports to the BOD’s audit committee.
_______ is the probability that the auditor will render an unqualified (clean) opinion on FS that is materially misstated.
Audit Risk
____ risk is associated with the unique characteristics of the business or industry of a client
Inherent RIsk
T or F: Auditors can reduce the level of inherent risk through excellent controls
False.
____ 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.
Control Risk
How can control risks be reduced?
Test of Internal Controls
____ 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
Detection Risk
What do you call the acceptable level of detection risk used by the Auditor?
Planned detection risk
What is the relationship between detection risk percentage and the number of substantive testing?
Inverse Relationship
What is the first step in the Structure of an IT Audit?
Audit Planning
What is a major part of the audit planning phase?
Audit Risk Analysis
What do you usually do in the Audit Planning phase?
Find out the risks in the organization and determine what controls have been put in place to reduce these risks
What is the second step of the IT audit structure?
Test of Controls
At the conclusion of the tests of controls phase, the auditor must?
Assess the quality of the internal controls
What is the third step in the IT Audit Structure?
Substantive Testing
This step in the IT audit structure involves a detailed investigation of specific account balances and transactions.
Substantive Testing
What are the four modifying assumptions that guide designers and auditors of internal controls?
- Management Responsibility
- Reasonable Assurance
- Methods of Data Processing
- Limitations
