More Difficult Concepts Flashcards
What is a key trait for (EDI) Systems?
Preventive controls generally are more important than detective controls in (EDI) System
What is a primary reason Analytical Procedures are used during the planning stage of an audit?
To examine financial and nonfinancial data aggregated at a high level
What are Assurance Services?
Independent professional services that improve the quality of information (or its context, for decision makers)
What are consulting services?
Services designed for the improvement of operations
E.g. Resulting in better outcomes.
What are compilation services?
The assembly of financial statements based on information and assumptions of a responsible party
What is not a requirement for you to provide Eldercare services?
Prior Experience
E.g. It is a fairly new service which does NOT require prior experience to perform
What is the point of continuing professional education (CPE) and training activities?
To fulfill assigned responsibilities and qualifications for advancement
Which financial statement is the auditor least concerned about? Income State or Balance Sheet account?
Income State;
Because the income statement accounts have no beginning balances to provide an analysis
What is a Hash Total?
It’s a control total without a defined meaning
E.g. total of employee numbers or invoice numbers
Invoice Number - #102, #202, #305,and #109 = Hash Total of 718
What would “edit checks” tell me if I used a sales order processing system?
It would provide me with a File of all rejected sales transactions
E.g. system tests “Completeness, Reasonableness, etc.” prior to acceptance
What are the six elements of Quality Control
- Leadership Responsibilities for Quality Control within the firm
- Relevant Ethical Requirements
- Acceptance and Continuance of Client Relationships
- Human Resources
- Engagement Performance
- Monitoring
What is the purpose for Quality Control Element 1?
“Leadership Responsibilities for Quality Control within the firm”
Promotes an internal culture of recognizing that quality is essential in performing engagements
What is the purpose for Quality Control Element 2?
“Relevant Ethical Requirements”
Tells firm why policies and procedures should be established to provide assurance that firm personnel comply with ethical requirements
What is the purpose for Quality Control Element 3?
Acceptance and Continuance of Client Relationships
Provides reasonable assurance firm has considered the client’s integrity; and
has information about lack of client integrity
What is the purpose for Quality Control Element 6?
Monitoring
Provides reasonable assurance that policies and procedures related to the system of quality control;
- Are relevant, adequate, operating effectively, and complied with
What situations of actual or threatened litigation impair independence?
(1) Litigation has begun alleging deficient audit work;
(2) Litigation has begun alleging fraud or deceit by current management; and
(3) Management has expressed an intention to commence litigation alleging deficient audit work, and the auditor concludes that it is probable that such a claim will be filed
What would be considered an indirect financial interest in a corporate client?
An Investment held in a mutual fund
Note: Independence is impaired if there is a direct or materially indirect financial interest in the client
What is the difference between the Type 1 and Type 2 Service Auditor’s Report?
Type 2 Report contains an opinion:
On the Operating Effectiveness of Controls throughout the specified period
What is the auditor’s role involving management’s assessment internal control effectiveness?
To determine whether management’s report is complete and properly presented
What power (e.g. authority) does the PCAOB have?
The PCAOB may:
- Impose financial penalties for up to $15 million dollars
- Seek removal of a person from a registered firm