Unit 3 Flashcards
The auditor is not responsible for disclosure of fraudulent activity outside of ______ and ________
Management/Governance
Bearer bonds can increase the ______ from misappropriation of assets
RMM
Which of these exist independently of an F/S audit?
IR, CR, DR
IR and CR, DR cannot
Assessing (Audit Risk/Inherent Risk/Control Risk) is to contribute to an auditor’s evaluation that a Material Misstatement can exist in the F/S
Control Risk
This type of risk is that a Material Misstatement may not be detected by a client’s Internal Control in a timely basis
CR
This type of risk is determined by the auditor’s evaluation of Internal Control
CR
This type of risk is the susceptibility to Material Misstatement if no Internal Control exists.
IR
This type of risk is associated with the auditor not being able to detect a material misstatement
DR
This type of risk is determined by the assessed Control Risk
DR
Substantive procedures will (never/sometimes/always) be necessary for all relevant assertions related to each material class of transactions
Always
Derivative transactions are a (CR/IR/DR) factor.
Inherent Risk
Analytical procedures (do/don’t) provide evidence of effectiveness of IC
Do NOT
When are analytical procedures performed?
During the review and planning stages
What three tests are required in audits of F/S?
Operating effectiveness
Analytical Procedures
Risk Assessment
What the two ways are required to get enough evidence to support CR?
Inquiry and Observation
Tests of controls are only necessary if…
Substantive procedures alone are insufficient.
Auditor’s risk assessment supports ____ but does not support ______
NET / Relevance
“Qualifed” vs “Modified”
Qualified = GAAP issue (F/S) Modified = GAAS issue (scope limitation/internal control)
Tests of details are used to….
Detect MM in the F/S
What determines whether Analytical or Substantive procedures are used?
Precision/Reliability of the accounts
If accounts are more reliable, (Analytical/Substantive) procedures are more likely to be used.
Analytical
Analytical procedures at the review stage help the auditor evaluate the overall F/S _________
Presentation
Tolerable (misstatement/deviation) is used in the sample size calculation for variable sampling.
Misstatement
Tolerable (misstatement/deviation) is used in the sample size calculation for attribute sampling.
Deviation
Allowable risk for assessing control risk too ____ is considered in planning a sample.
Low
This type of risk is the uncertainty in applying audit procedures to specific tasks.
Audit Risk
This type of risk includes all risks not due to sampling.
Nonsampling Risk
This type of sampling is often a “Yes/No” question
Attribute
This type of sampling is often a numerical one, such as “is a given account balance reasonable?”
Variable
When is stratified sampling used?
When there is a lot of variation in a population.
Stratified MPU sampling produces (larger/smaller) sample sizes and (more/less) precision.
Smaller/More
Decreasing acceptable risk (does/doesn’t) affect reliability.
Does NOT
