Preliminary and Planning Phase Flashcards

1
Q

What is the audit process?

A
  1. Preliminary phase
  2. Planning phase
  3. Gathering of audit evidence
  4. Concluding
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2
Q

What are the preliminary phase activities?

A

Those done by the auditor to determine the acceptability of a client.

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3
Q

What is audit risk?

A

The possibility of an auditor expressing an inappropriate opinion on an entity’s fair presentation

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4
Q

What are the 2 levels that an auditor must assess risk of material misstatement on?

A

Overall financial level
Assertion level

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5
Q

What are risks at overall financial level?

A

Pervasive risks that affect various assertions simultaneously

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6
Q

What are risks at assertion level?

A

Risks that affect a single transaction or balance

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7
Q

What are material misstatements?

A

Misstatements that individually or in aggregate could reasonably be expected to influence users’ decisions.

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8
Q

What are the 3 levels of materiality?

A
  1. Planning materiality
  2. Performance materiality
  3. Final materiality
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9
Q

What is planning materiality?

A

The determination of the total amount of overall misstatement that will be tolerated.

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10
Q

What is performance materiality?

A

The determination for specific account balances or classes of transactions.

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11
Q

What is final materiality?

A

Materiality set at the concluding stage of an audit and is the level against which identified, uncorrected misstatements will be judged.

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12
Q

What are substantive procedures?

A

Procedures used by the auditor to obtain evidence to detect material misstatement.

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13
Q

What are the 2 types of substantive procedures?

A
  1. Tests of detail
  2. Analytical review procedures
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14
Q

What are the 4 methods of sample selection?

A

Random sampling
Systematic sampling
Haphazard sampling
Block sampling

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15
Q

What is audit evidence?

A

The information used by the auditor to arrive at the conclusions on which the auditor’s opinion is based.

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16
Q

What are the 4 factors that affect the relevance and reliability of audit evidence?

A

Assessed risk
Materiality
Persuasiveness
Source

16
Q

What are the 4 factors that affect the relevance and reliability of audit evidence?

A

Assessed risk
Materiality
Persuasiveness
Source

17
Q

What are the contents of the audit file?

A

The aggregate of the auditor’s working papers.

18
Q

What is the permament audit file?

A

The file that includes information of a recurring nature, accumulating prior years’ audits.

19
Q

What is the transaction current file?

A

The file that includes information about the client’s systems and the audit thereof.

20
Q

What is the financial statement current file?

A

Records of the verification procedures on one-year balances.