Brainscape's Knowledge GenomeTM

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


See full index

BUS273 - Audit & Assurance Services > Planning An Audit (Development) - Chapter 8 > Flashcards

Planning An Audit (Development) - Chapter 8 Flashcards

1
Q

testing for understatement?

A

trace source documents to FS to see if it’s been included

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

testing for overstatement?

A

tracing balances in the FS to source docs

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

examples of sampled source docs to test for understatement?

A
  • GDNs or GRNs
  • payroll documents (e.g., time sheets, contracts, bonus letters)
  • bank statements / loan documentation
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

examples of areas in the FS that are checked to assess for overstatement?

A
  • nominal ledger
  • asset register
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

which assertions relate to understatement / overstatement?

A

understatement = completeness

overstatement = existence / occurrence

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

examples of uses of analytical procedures?

A
  • obtain breakdowns to identify anomalies
  • analyse monthly data for variations
  • calculate expected amounts & compare to actuals
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

making enquiries of management can assist with…

A
  • anticipated changes in business activity
  • rationale for an accounting treatment
  • reasons for an unusual trend/result
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

what does an auditor NOT need to ask management for?

A
  • acquisitions/disposals that have occurred
  • accounting entries not subject to judgement
  • queries on ratios / trends which are logical
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

how are audit procedures applied?

A

ACTION applied to a SOURCE to fulfil an OBJECTIVE

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

examples of audit procedures?

A
  • use an expert
  • read board minutes
  • enquire management
  • agree balance from the purchase / sales ledger
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

procedure applied to foreign currency transactions?

A
  • reperform a sample of translation calculations
  • agree the exchange rates used to a reliable source
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

examples of audit procedures involving data analytics software (DAS)?

A
  • use data analytics software to identify … for investigation
  • perform data analytics routines to recalculate/analyse
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

estimates are commonly made on…

A
  • inventory obsolescence
  • depreciation of PPE
  • valuation of financial instruments
  • pending litigation
  • impairment
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

what does an auditor’s risk assessment focus on?

A

inherent risk factors such as:
- degree of uncertainty within an estimate
- how subject of complex a matter is

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

how does ESG influence accounting estimates?

A
  • fair values
  • impairment of non-current assets
  • provisions/contingent liabilities (relating to transition risks)
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

if a company isn’t a going concern, FS must be prepared on a…

A

liquidation basis

or ‘break-up’ basis

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

impact of preparing FS on a liquidation basis?

A
  • no non current assets or liabilities
  • assets valued at recoverable amount
  • provisions may be required for new costs
18
Q

management / auditor responsibilities regarding going concern?

A

management = ensure FS are prepared using the appropriate basis

auditor = check if there’s a MM caused by going concern & the appropriateness of basis for FS

19
Q

procedures to ascertain if an entity’s a going concern or not?

A
  • review future plans e.g., forecasts / projections
  • review financing e.g., borrowing facilities, loans & covenants
  • review board minutes
20
Q

can ESG impact going concern?

A

yes

  • weather conditions can impact assets (change in demand, destruction of assets)
  • transition risks can result in material write downs of assets
  • failure to meet net-zero target can repel investors
21
Q

who may an auditor rely on?

A
  • internal auditors
  • expert
  • service organisation
  • auditors of subsidiary
22
Q

what does typical work of an internal auditor entail?

A

reviewing systems of internal control

23
Q

before relying on internal auditors, what should be done?

A
  • assess their objectivity & competence
  • assess their approach (planning, review, documentation etc)
24
Q

how should an auditor respond to internal auditor’s work?

A
  • test their work (observe the procedures used) to conclude the adequacy of it
  • extend your own procedures if internal auditors’ work is deemed inadequate
25
Q

performance indicators when assessing the work of internal auditors?

A
  • progress compared to planned work
  • recommendations accepted vs recommendations made %
  • total time taken for an assignment
  • feedback from users of internal audit
26
Q

examples of when an auditor’s expert may be required?

A
  • interpreting legal contracts
  • valuing PPE
  • analysing tax issues
27
Q

before relying on experts, what should be done?

A
  • assess their competence and independence
  • obtain an understanding of the field of expertise and evaluate the adequacy of the expert’s work
28
Q

auditor responsibilities when an entity outsources operations?

A
  • obtain an understanding of the outsourced services
  • consider access to sources of evidence
  • assess the risks arising
29
Q

if a group auditor doesn’t audit all components…

A

they’ll need to rely on the component auditors

30
Q

component?

A

an entity whose financial information is included in group FS

31
Q

responsibilities of the group auditor?

A
  • establish overall group audit strategy / plan
  • direct/supervise component auditors
  • determine sufficient/appropriate evidence
  • form & communicate an opinion on group FS
32
Q

who’s responsible for forming an opinion on group FS?

A

group engagement partner

33
Q

must auditor’s reports for groups contain reference to component auditors?

A

no, not unless required by law

34
Q

does materiality differ between group FS and component FS?

A

potentially

if anything, component auditors’ materiality threshold will be lower than group

35
Q

does group auditor take responsibility for designing audit procedures?

A

yes

36
Q

understanding the component auditor includes an assessment of…

A
  • compliance with ethical requirements
  • professional competence
  • whether the group auditor can get involved if necessary
  • applicable regulation for component auditor
37
Q

group auditor should do what to the component auditor?

A
  • communicate requirements
  • request constant communication
38
Q

should group auditor evaluate/review the work performed by the component auditor?

A

yes

if work performed isn’t adequate, the group auditor should determine how additional procedures will be performed

39
Q

what should group auditors communicate to component auditors?

A
  • work to perform
  • form & contents of communications
  • ethical requirements
  • component materiality
  • list of related parties
  • significant risks
40
Q

what should component auditor communicate to group auditor?

A

confirmation of:
- compliance w/ ethical requirements
- compliance w/ engagement team requirements

  • list of uncorrected misstatements
  • overall findings, conclusions or opinions
  • description of identified deficiencies

BUS273 - Audit & Assurance Services (24 decks)

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