Responding to the Assessed Risks of Material Misstatement Flashcards
What are the 3 elements of further audit procedures?
Nature, extent, and timing
What does the nature of an audit procedure include?
Purpose and type
What does the extent of audit procedures refer to?
Quantity to be performed
When can audit tests be performed?
Interim date or at period end
The auditor’s specific approach to identified risks at the relevant assertion level may consist of either?
A substantive approach or combined approach
What does substantive approach consists of?
Only substantive procedures
When does substantive approach occur?
When control risk is assessed at maximum
Control risk is assessed at maximum because?
No effective controls, Implemented controls are assessed as ineffective, or it would not be efficient to test the operating effectiveness of controls
What tests are used in a combined approach?
Tests of the operating effectiveness of controls and substantive procedures
If controls are operating effectively, how much assurance will be required from substantive procedures?
Less assurance
Tests of controls are generally required when?
Entity conducts its business using IT, highly automated processing with little or no manual intervention, or audit evidence is obtained in electronic form
For all significant risks, the auditor should?
Evaluate the design of the entity’s related controls and determine whether the controls have been implemented and perform substantive procedures that are clearly linked and responsivve to the risk
What procedures are used to detect material misstatements at the relevant assertion level?
Substantive procedures
Substantive procedures are required for?
Material transaction class, account balance, or disclosure
What are the 2 types of substantive procedures?
Tests of details and substantive analytical procedures
