unit 7-8 Flashcards
audit risk low or high
high risk client in 1% low risk is 5%
Best sampling tech for year end
block
MUS(PPS) tests
dollar overstatements
When is sampling appropriate?
Confirmation
Higher deviation =
higher sample size
systamtic testing what’s selected
divide by unites ie evrey 9th unit
Overall(planning)
Are the financial statements overall correct.
correction of mistatment
another paragraph
money and days
700 60 75-700 75 less than 75mil 90
non sampling risk
auditor incorrectly diagnosed problems or did not follow procedures
greater than 10%
write out
side letters
agreement containing contract terms that are not part of the contract increases audit risk by hiding revenue recognition
performance(tolerable error)
testing of significant accounts locations and audit procedures
planning
overall financial statement correctness
planning
misstatements identified throughout audit will be at end of audit
tolerable failure rate
amount of controls tolerated before changing assessment
attribute sampling used for
tests of controls ie 0 or 1
going concern creates
emphasis of matter paragraph can be any audit opinion including unqualified
type 2 events only require
disclosure at most
type 1 events require
disclosure and adjusting journal entry
management refuses to sign management representation letter
scope limitation audit can not be completed
financial statement review
limited negative assurance that auditor is not aware of any limitations made to audit statment
“We have audited”
Intro paraph
material departure from gap =
as a minimum consequence qualified
cams vs kams
challenging public issues must be communicated, in private companies kams only need be communicated if company asked auditor to do so
what opinion if management wants added but not required
disclaimed ie shouldn’t be audited
fraud acquisition payment cycle
large or manual adjustment to inventory
receiving document
records goods from suppliers
control that ensures sales are recorded
prenumbered items ie break from 100 101 102 is easy to see in excel
for a NON public company when would you test control
time is money since testing of controls is not required only used if it will be efficient ie control risk is low
unreturned request
send second request than alternative precedure
Nature of risk response
type of audit procedure performed
time of risk response
when and are they predicatable
monetary tests
direct tests of account balances and assertions
controls related to exsitence
sales and accounts receivable are recorded only when earned
controls related to completeness and example
MAKE SURE that all valid transactions are recorded ie prenumbered sales and billing
Rights and obligations rev and examples
account receivable are owned by the organization ie inquire management or board meetings
Valuation or allocation rev cycle
Sales are recorded in the right period
Presentation
Credit balances and related properly disclosed
corruption perception index
the extent to which corruption exists
opinion summary
“We have audited” financial statement summary
qualified opinion reasons
nonjusfited departure from gap=material but not persuasive but entire finacial statment is not mistated
adverse opinion resons
material and persusasive
Inventory presentation/disclosure
properly classified on balance sheet date and disclosed
value/allocation
true economic value
right an obligation
actually owe, have title etc
completeness
not under have all AP
