Progress Tests Flashcards
After issuing a report, an auditor has no obligation to make inquires or perform other procedures concerning the audited financials, unless
information, which existed at the report date and may affect the report, comes to the auditor’s attention. In this case the auditor would perform procedures to determine if the information affects the report and is important to external users.
In the planning phase of an audit the auditor would
obtain an understanding of the entity’s risk assessment process. The auditor would not identify specific internal control activities designed to prevent fraud.
Writing off obsolete inventory to net realizable value just before year end is not indicative of the existence of
related party transactions.
In performing an audit in accordance with GAGAS (Yellow Book), the auditor
accepts greater reporting responsibility than accepted under a GAAS audit, since the auditor must report on compliance with laws, rules, and regulations, violations of which may affect financial statement amounts, and the organizations internal control over financial reporting.
THe auditor would need to know the upper deviation rate (or the allowance for sampling risk) in order to determine if a control can be relied upon. The upper deviation rate (not the sample deviation rate) is compared
to the tolerable rate.
Attribute sampling examines the rate of occurrence in a sample; the attribute either exists or it does not exist. Therefore, attribute sampling is more useful for
test of controls, such as examination of time cards for proper approval. Attribute sampling is not appropriate for substantive test of details.
In certain audit engagements, the auditor may be required to comply with auditing requirements in addition to GAAS. The auditor may conduct an audit in accordance with
both GAAS and GAGAS. Additional language in the auditor’s responsibility paragraph stating both sets of standards were followed should be added.
When an auditor is requested to change the engagement from an audit to a compilation, the auditor must consider
the effort needed to complete the audit, the cost of completing the audit, and the reason why the client requested the change. If the audit is substantially complete or an insignificant effort is needed to complete the audit, the auditor should consider the priority of agreeing to the request to change to an compilation.
The user auditor should not make reference to the report of the
service auditor as a basis for their own opinion on the user organization’s financials. Since the service auditor is not responsible for the examination of any part of the user organization’s financials, a division of responsibility is not appropriate.
Computer assisted audit technique that permits an auditor to insert the auditor’s version of the client’s program to process data and compare the output with the client’s input is
parallel simulation. The client’s input data is processed through both the the auditor’s version of the client’s program and the client’s program and the output is compared.
Self-interest threat is
the treat that a financial or other interest will inappropriately influence an auditor’s judgement or behavior.
Self-review threat is
the threat than an auditor or audit organization that has provided nonaudit services will not appropriately evaluate the results of previous judgements made or services performed as part of the nonaudit services when forming a judgement significant to an audit.
Familiarity threat is
the treat of that aspects of relationships with management or personnel of the audited entity, such as a close or long relationship, or that of an immediate or close family member, will lead an auditor to take a position that is not objective.
