Study sets matching "audit 4"

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Study sets matching "audit 4"

90 terms
Audit 4: Audit Evidence
What is audit evidence ?
Types of Audit Evidence
Reasonable basis for opinion
Sufficiency of audit evidence influenc…
all information auditor uses to arrive at conclusions on whic…
Accounting records tested through analytical and substantive…
auditor is not a guarantor ... cost benefit relationship valid r…
risk of material misstatement ... quality of audit evidence
What is audit evidence ?
all information auditor uses to arrive at conclusions on whic…
Types of Audit Evidence
Accounting records tested through analytical and substantive…
7 terms
Audit 4-Audit Evidence
Define audit evidence
What is the objective of substantive t…
How does an auditor test accounting re…
What does corroborating evidence inclu…
Support for audit opinion
Detect material misstatement in F/S
Through analytical and substantive procedures.
Minutes of meetings, confirmations, industry analysts' report…
Define audit evidence
Support for audit opinion
What is the objective of substantive t…
Detect material misstatement in F/S
Audit 4 (Audit Evidence)
Hierarchy of Audit Evidence
Test of Details
Analytical Procedures
Vouching
Auditors direct knowledge, external evidence, internal eviden…
Audit procedures used to gather evidence to support the accou…
Required in planning and final review. Comparisons of financi…
Going from F/S back to supporting documentation. JE to source…
Hierarchy of Audit Evidence
Auditors direct knowledge, external evidence, internal eviden…
Test of Details
Audit procedures used to gather evidence to support the accou…
Audit 4-Audit Evidence
audit evidence
objective of substantive testing
Gathering audit evidence when performing
types of audit evidence
all information the auditor uses to arrive at the conclusions…
detect material misstatement in FS
risk assessment procedures, tests of controls, substantive pr…
accounting records, corroborating evidence, evidence in elect…
audit evidence
all information the auditor uses to arrive at the conclusions…
objective of substantive testing
detect material misstatement in FS
14 terms
Audit 4
Audit evidence
Objective of substantive testing
Types of audit evidence
Obtaining sufficient appropriate audit…
all the information the auditor uses to arrive at the conclus…
Detect material misstatements in F/S
*Accounting records (support F/S): auditor tests through anal…
*Reasonable basis for an opinion... -audit evidence must PERSUAD…
Audit evidence
all the information the auditor uses to arrive at the conclus…
Objective of substantive testing
Detect material misstatements in F/S
6 terms
Audit 4
On receiving a client's bank cutoff st…
Which of the following characteristics…
Which of the following fraudulent acti…
In testing controls over cash disburse…
Prior-year checks listed in the cutoff statement to the year-…
Low Avg balance compared to high level of deposits ... Kiting oc…
Authorization of credit memos by personnel who receive cash m…
Is responsible for mailing the checks. Once signed, the check…
On receiving a client's bank cutoff st…
Prior-year checks listed in the cutoff statement to the year-…
Which of the following characteristics…
Low Avg balance compared to high level of deposits ... Kiting oc…
7 terms
4-Audit Process
Audit Process
Activities during Audit Planning
Internal control consideration
Substantive Procedures?
1. Planning... 2. Preliminary evaluation... 3. Tests of controls... 4.…
1. Acceptance/continuance ... 2. Risk assessment procedures... 3. S…
1. Obtain understanding for planning, assessing RMM for each…
Evidence gathering to detect material misstatements
Audit Process
1. Planning... 2. Preliminary evaluation... 3. Tests of controls... 4.…
Activities during Audit Planning
1. Acceptance/continuance ... 2. Risk assessment procedures... 3. S…
54 terms
Audit 4
Inherent Limitation of controls
Confirmations
$ubstantive procedures
Analytical procedures
Human Error, Collusion, Management Override
Positive- Need response (Bad ROOOMM)... Negative- Do not return(…
Designed to detect material misstatements in cycles.
Do not necessarily indicate error or fraud, just indicate a v…
Inherent Limitation of controls
Human Error, Collusion, Management Override
Confirmations
Positive- Need response (Bad ROOOMM)... Negative- Do not return(…
9 terms
Auditing 4
audit committee
confidential client information
direct financial interest
ethical dilemma
selected members of a client's board of directors whose respo…
client information that may not be disclosed without the spec…
the ownership of stock or other equity shares by members of t…
a situation in which a decision must be made about the approp…
audit committee
selected members of a client's board of directors whose respo…
confidential client information
client information that may not be disclosed without the spec…
audit 4
planning phase of the audit includes t…
Analytical procedures
five levels of misstatements
determine a measure of materiality
1. Performing client acceptance procedures ... 2. Preparing a cl…
comparing recent financial results with those in the industry…
1. Identified misstatement . An actual misstatement identifie…
most auditors use factors such as percentage of net income, g…
planning phase of the audit includes t…
1. Performing client acceptance procedures ... 2. Preparing a cl…
Analytical procedures
comparing recent financial results with those in the industry…
9 terms
4 - Audit
Audit committee
Confidential client information
direct financial interest
ethical dilemma
selected members of a client's board of directors who's respo…
client information that may not be disclosed without the spec…
the ownership of stock or other equity shares by members or t…
a situation in which a decision must be made about the approp…
Audit committee
selected members of a client's board of directors who's respo…
Confidential client information
client information that may not be disclosed without the spec…
39 terms
audit 4
what is the objective of the audit plan?
audit plan includes
preliminary analytical procedures incl…
percentage variance calculation
to reduce audit risk to an acceptably low level.
-analytical procedures to assess risk... -understanding legal an…
-comparison of c/y financials to p/y financials... -predictable…
(cy-py)/py
what is the objective of the audit plan?
to reduce audit risk to an acceptably low level.
audit plan includes
-analytical procedures to assess risk... -understanding legal an…
6 terms
audit 4
inherent risk
control risk
detection risk
audit risk
probability that material misstatement will occur
probability that material misstatement will not be prevented…
risk that the audit will fail to detect material misstatement
risk that clean opinion will be issued when one is not warran…
inherent risk
probability that material misstatement will occur
control risk
probability that material misstatement will not be prevented…
48 terms
Audit 4
When is audit evidence gathered during…
What factors should be considered when…
How is the relevance of evidence deter…
What influences the auditor's decision…
When performing:... Risk assessment procedures ... Test of controls…
AEIO... The auditor's direct personal knowledge ... Evidence…
To be relevant, evidence must related to the financial statem…
Risk of material misstatement (RMM)... The quality of audit evi…
When is audit evidence gathered during…
When performing:... Risk assessment procedures ... Test of controls…
What factors should be considered when…
AEIO... The auditor's direct personal knowledge ... Evidence…
30 terms
Audit 4
When might accounts payable confirmati…
define lapping
Define kiting
describe an audit procedure that would…
-internal control is weak... -there are disputed amounts ... -month…
delaying the recording of cash receipts to conceal the theft…
overstatement of bank balances by transferring cash between b…
-reviewing each transfer on the bank transfer schedule ... -look…
When might accounts payable confirmati…
-internal control is weak... -there are disputed amounts ... -month…
define lapping
delaying the recording of cash receipts to conceal the theft…
48 terms
Audit 4
When is audit evidence gathered during…
What factors should be considered when…
How is the relevance of evidence deter…
What influences the auditor's decision…
When performing:... Risk assessment procedures ... Test of controls…
AEIO... The auditor's direct personal knowledge ... Evidence…
To be relevant, evidence must related to the financial statem…
Risk of material misstatement (RMM)... The quality of audit evi…
When is audit evidence gathered during…
When performing:... Risk assessment procedures ... Test of controls…
What factors should be considered when…
AEIO... The auditor's direct personal knowledge ... Evidence…
21 terms
Auditing 4
Efficiency and Effectiveness of Analyt…
Analytic Procedures- Documentation
TEST of Details-- Directional Testing-…
TEST of Details-- Directional Testing-…
1) Nature of Assertion being tested... 2) Plausibility and Predi…
When an analytic procedure is used as the principal substanti…
Vouch for EXISTENCE/ SUPPORT from... Financial Statements --->…
Trace for COMPLETENESS/ COVERAGE from... Source Docs --> Financ…
Efficiency and Effectiveness of Analyt…
1) Nature of Assertion being tested... 2) Plausibility and Predi…
Analytic Procedures- Documentation
When an analytic procedure is used as the principal substanti…
Auditing 4
In addition to evaluating the frequenc…
The purpose of an alert to restrict th…
What is an auditor's primary method to…
In a computerized payroll system envir…
Initially concealed by a forged document.... A deviation will r…
Reducing the potential for misunderstanding if the auditor's…
Reviewing the response from the client's lawyer to a letter o…
Proper approval of overtime by supervisors.... Test data involve…
In addition to evaluating the frequenc…
Initially concealed by a forged document.... A deviation will r…
The purpose of an alert to restrict th…
Reducing the potential for misunderstanding if the auditor's…
Audit - Chapter 4 - Audit Evidence
Vouch
Trace
What are test of controls?
What is attestation risk?
- Test for existence... - Test for support... - Financial Statement…
- Test for Completeness... - Test for coverage... - Support to Fina…
- Observation... - Inspection/Examination
Risk that the CPA may unknowingly fail to modify the report o…
Vouch
- Test for existence... - Test for support... - Financial Statement…
Trace
- Test for Completeness... - Test for coverage... - Support to Fina…
81 terms
Audit Ch 4
The underlying reason for a code of pr…
Which of the following statements is t…
Which of the following is(are) true co…
Which of the following is not one of t…
the need for public confidence in the quality of service of t…
The CPA firm is engaged and paid by the client, but the prima…
I and II
Definitions (are parts: Principles, Rules of Conduct, Interpr…
The underlying reason for a code of pr…
the need for public confidence in the quality of service of t…
Which of the following statements is t…
The CPA firm is engaged and paid by the client, but the prima…
Audit A4: Audit Evidence
When to Gather Audit Evidence
Types of Audit Evidence
Accounting Records
Corroborating Evidence
Risk assessment procedures... Test of controls... Substantive proce…
Accounting Records... Corroborating Evidence... Evidence in Electro…
Test through analytical procedures and substantive procedures
Meetings of meetings... Confirmations... Observation... Inquiry... Etc.
When to Gather Audit Evidence
Risk assessment procedures... Test of controls... Substantive proce…
Types of Audit Evidence
Accounting Records... Corroborating Evidence... Evidence in Electro…
63 terms
Auditing 4
Audit evidence
Audit evidence gathered through
Types of audit evidence
Accounting records
All information used to arrive at conclusions
-risk assessment procedures... -tests of control... -substantive pr…
-accounting records... -corroborating evidence... -evidence in elec…
Initial entries and supporting records
Audit evidence
All information used to arrive at conclusions
Audit evidence gathered through
-risk assessment procedures... -tests of control... -substantive pr…
91 terms
Audit 4 Questions
Which of the following is not true reg…
Audit documentation serves mainly to:…
An auditor ordinarily uses a working t…
Factors affecting the nature and exten…
Choice "c" is correct. Quality control standards relate to th…
Choice "a" is correct. Audit documentation serves mainly to p…
Choice "c" is correct. The working trial balance generally co…
1. The risk of material misstatement;... 2. The extent to which…
Which of the following is not true reg…
Choice "c" is correct. Quality control standards relate to th…
Audit documentation serves mainly to:…
Choice "a" is correct. Audit documentation serves mainly to p…
Auditing 4
4 evidence gathering techniques
Substantive procedures (obj)
Substantive procedures (2 types)
Substantive procedures (designed to ta…
1 risk assessment procedures... 2 tests of controls... 3 substantiv…
1 objective is to detect material misstatement in F/S
1 tests of details... 2 Substantive analytical procedures
1 $ balances... 2 transaction totals... 3 disclosure amounts
4 evidence gathering techniques
1 risk assessment procedures... 2 tests of controls... 3 substantiv…
Substantive procedures (obj)
1 objective is to detect material misstatement in F/S
23 terms
Auditing: 4
accounting estimates
analytical procedures
audit committee
audit risk
the approximations of financial statement numbers often inclu…
the reasonableness tests used to gain an understanding of fin…
a subset of a company's board of directors composed of outsid…
the risk that the auditor will express an inappropriate audit…
accounting estimates
the approximations of financial statement numbers often inclu…
analytical procedures
the reasonableness tests used to gain an understanding of fin…
31 terms
Audit Chapter 4
Analytical Procedures
Audit Procedures
Audit Risk
Business Risk
Evaluations of financial information made through analysis of…
specific acts performed by the auditor in gathering evidence…
the risk that the auditor expresses an inappropriate audit op…
risks resulting from significant conditions, events, circumst…
Analytical Procedures
Evaluations of financial information made through analysis of…
Audit Procedures
specific acts performed by the auditor in gathering evidence…
Audit Chapter 4
The underlying reason for a code of pr…
Which of the following statements is t…
Which of the following is(are) true co…
Which of the following is not one of t…
A
B
Both
D. Definitions
The underlying reason for a code of pr…
A
Which of the following statements is t…
B
53 terms
Audit chapter 4
Engagement risk is... ... A) The risk of is…
Client risk as defined in the text is…
Under Statements on Auditing Standards…
When assessing the risk of material mi…
B) The auditor's risk of loss from events arising in connecti…
B) The overall risk of material misstatement
B) Misinterpretation by management of facts that existed when…
A) Susceptible to bias.
Engagement risk is... ... A) The risk of is…
B) The auditor's risk of loss from events arising in connecti…
Client risk as defined in the text is…
B) The overall risk of material misstatement
10 terms
Audit - Lecture 4 - Audit Evidence
Assertions
Assertions About Classes of Transactions
Assertions made about Account Balances…
Audit Evidence
Statements regarding the recognition, measurement, presentati…
1. Occurrence - transactions and events that have been record…
1. Existence - A, L, E exist (risk of overstatement)... 2. Righ…
Evidence - information that an auditor uses when arriving at…
Assertions
Statements regarding the recognition, measurement, presentati…
Assertions About Classes of Transactions
1. Occurrence - transactions and events that have been record…
Audit Test 4
B. The auditor decides to refer to the…
C. Unqualified opinion.
A. Is appropriate and would not negate…
A. A qualified opinion or a disclaimer…
In which of the following situations would an auditor ordinar…
A public entity changed from the straight-line method to the…
An auditor includes a separate paragraph in an otherwise unmo…
Eagle Company, a public company, had a computer failure and l…
B. The auditor decides to refer to the…
In which of the following situations would an auditor ordinar…
C. Unqualified opinion.
A public entity changed from the straight-line method to the…
Auditing 4
Which of the following assertions is r…
Which of the following control conditi…
When performing preliminary analytical…
which mix of evidence would be most ap…
Right and Obligations
restrictive endorsements are stamped on check when checks are…
profitability has been fairly steady from period to period, b…
about 50% substantive tests of details, 10% analytics and 40%…
Which of the following assertions is r…
Right and Obligations
Which of the following control conditi…
restrictive endorsements are stamped on check when checks are…
Auditing 4
1. General... _________ evidence is all…
Audit evidence may also come form othe…
II. Types of Audit Evidence... _________…
A. Accounting Records... Accounting reco…
Audit, Risk
Quality
Audit
Checks, Records, Opinion, Internal
1. General... _________ evidence is all…
Audit, Risk
Audit evidence may also come form othe…
Quality
audit terms 4
accounting estimates
39 analytical procedures
audit committee
48 audit risk
The approximations of financial statement numbers often inclu…
The reasonableness tests used to gain an understanding of fin…
A subset of a company's board of directors composed of outsid…
The risk that the auditor will express an inappropriate audit…
accounting estimates
The approximations of financial statement numbers often inclu…
39 analytical procedures
The reasonableness tests used to gain an understanding of fin…
Audit Chp. 4
Auditor's Responsibility
Inherent Risk and Control Risk
Audit Risk
Inherent Risk
Identify and assess risks of material misstatement, whether d…
(IR x CR) = (RMM)... Risk that material misstatements exist
IR x CR x DR... Inherent x Control x Detection
The susceptibility of an account to misstatement before consi…
Auditor's Responsibility
Identify and assess risks of material misstatement, whether d…
Inherent Risk and Control Risk
(IR x CR) = (RMM)... Risk that material misstatements exist
28 terms
Audit Chapter 4
Failure to meet company objectives is…
Auditing standards do not require audi…
If sales were overstated by recording…
One of the typical characteristics of…
c. Correct This is the definition of business risk.
d. Correct. Auditors are not required to report all finding o…
d. Correct. In (fictitious) credit sales and (fictitious) rec…
b. Correct. Management fraud is victimization of investors th…
Failure to meet company objectives is…
c. Correct This is the definition of business risk.
Auditing standards do not require audi…
d. Correct. Auditors are not required to report all finding o…
30 terms
Audit 4 - Audit evidence - Part 1
Which of the following ratios would an…
An auditors purpose in reviewing the r…
A client uses a suspense account for u…
Which of the following tests of detail…
Cost of goods sold/average inventory... Analytical procedures i…
Classification and understandability ... The renewal of a note…
Suspense debits that management believes will benefit future…
Examining vendor statements for amounts not reported as purch…
Which of the following ratios would an…
Cost of goods sold/average inventory... Analytical procedures i…
An auditors purpose in reviewing the r…
Classification and understandability ... The renewal of a note…
76 terms
Chapter 4 Audit
Ethics are: ... A) needed in the professi…
________ means that a person acts acco…
A six-step approach is often used to r…
The underlying reason for a code of pr…
B
C
D
A
Ethics are: ... A) needed in the professi…
B
________ means that a person acts acco…
C
32 terms
Auditing 4
Which of the following assertions is r…
Inherent risk for cash is usually asse…
An auditor may assess fraud risk at a…
Which of the following control conditi…
Rights and Obligations
All of the above
All of the above
Restrictive endorsements are stamped on checks when checks ar…
Which of the following assertions is r…
Rights and Obligations
Inherent risk for cash is usually asse…
All of the above
Audit 4.2
1. Obtain the Relevant Facts... 2. Identi…
Obtain the relevant facts
Identify the ethical issues from the f…
Determine who is affected by the outco…
6 step approach to resolve an ethical dilemma:
Students should list the key facts from their dilemma
Students should identify the key ethical issue(s) in their di…
Students should identify who is involved and how each person…
1. Obtain the Relevant Facts... 2. Identi…
6 step approach to resolve an ethical dilemma:
Obtain the relevant facts
Students should list the key facts from their dilemma
15 terms
Audit Chapter 4
Analytical Procedures
Audit Procedures
Audit Risk
Business Risk
Evaluations of financial information made through analysis of…
Specific acts performed by the auditor in gathering evidence…
The risk that the auditor expresses an inappropriate audit op…
Risks resulting from significant conditions, events, circumst…
Analytical Procedures
Evaluations of financial information made through analysis of…
Audit Procedures
Specific acts performed by the auditor in gathering evidence…
15 terms
Audit Chapter 4
Analytical Procedures
Audit Procedures
Audit Risk
Business Risks
Evaluations of financial information made through analysis of…
Specific acts performed by the auditor in gathering evidence…
The risk that the auditor expresses an inappropriate audit op…
Risks resulting from significant conditions, events, circumst…
Analytical Procedures
Evaluations of financial information made through analysis of…
Audit Procedures
Specific acts performed by the auditor in gathering evidence…
32 terms
Audit Ch. 4
Audit risk
3 audit risk levels
Audit risk model... Audit risk =
Inherent risk & control risk are risk of
The risk that an auditor expresses an inappropriate audit opi…
1. Financial statement level... 2. Assertion level... 3. Individual…
Inherent risk x control risk x detection risk
material misstatements
Audit risk
The risk that an auditor expresses an inappropriate audit opi…
3 audit risk levels
1. Financial statement level... 2. Assertion level... 3. Individual…
5 terms
4 Phases of an Audit
4 phases
Details of the Plan and design of an a…
Details of the understanding internal…
Test balances and analytical procedure…
1. Planning and design audit approach... 2. Understatnding Inter…
1. Planning and documenting ... 2. Must obtain an understanding…
Assess control risk usually at interim. Also gain insight thr…
Must always do some tests. As defined by controls do the test…
4 phases
1. Planning and design audit approach... 2. Understatnding Inter…
Details of the Plan and design of an a…
1. Planning and documenting ... 2. Must obtain an understanding…
62 terms
Ch. 4 Audit
Ethics are:... A) needed in the professio…
________ means that a person acts acco…
One of the main reasons people act une…
A six-step approach is often used to r…
B
C
A
D
Ethics are:... A) needed in the professio…
B
________ means that a person acts acco…
C
Audit Chapter 4- Management Fraud and Audit Risk
business risk
better understand the client's busines…
inherent risk
audit risk
risks that could adversely affect the companies' ability to a…
the foundation of the company and the industry knowledge allo…
results of the events and transactions are recorded through i…
the risk that an incorrect opinion will be given
business risk
risks that could adversely affect the companies' ability to a…
better understand the client's busines…
the foundation of the company and the industry knowledge allo…
6 terms
Audit Chapter 4
Audit Risk
3 Components of audit risk
Inherent Risk
Control Risk
The risk that the auditor unknowingly fails to appropriately…
1. Inherent Risk... 2. Control Risk... 3. Detection Risk... AR=IR x C…
The risk that a material error will occur in an account balan…
The risk that a material error will occur in an account and n…
Audit Risk
The risk that the auditor unknowingly fails to appropriately…
3 Components of audit risk
1. Inherent Risk... 2. Control Risk... 3. Detection Risk... AR=IR x C…
Audit 4.4
1. Adverse Interest... 2. Advocacy... 3. Fam…
Adverse Interest
Advocacy
Familiarity
Threats to compliance with the AICPA's Code of Professional C…
The threat that a member will not act with objectivity becaus…
The threat that a member will promote a client's interest or…
The threat that, due to a long or close relationship with a c…
1. Adverse Interest... 2. Advocacy... 3. Fam…
Threats to compliance with the AICPA's Code of Professional C…
Adverse Interest
The threat that a member will not act with objectivity becaus…
13 terms
Audit 4-4
Analytical procedures at review stage
accumulation of identified misstatements
evaluation for misstatements
most likely to be considered material…
-required... -to evaluate overall presentation... -to assess conclu…
-accumulate during audit, other than those that are clearly t…
-size... -effects, individually or in aggregate of unrecorded mi…
-affect trends in profitability... -affect compliance... -increase…
Analytical procedures at review stage
-required... -to evaluate overall presentation... -to assess conclu…
accumulation of identified misstatements
-accumulate during audit, other than those that are clearly t…
15 terms
Audit - Chapter 4
audit risk
management fraud risk
errors
improper revenue recognition
the risk that the auditor may unknowingly fail to modify the…
management intentionally misstates financial statements
unintentional misstatements or omissions of amounts or disclo…
always presume that ______ is a fraud risk
audit risk
the risk that the auditor may unknowingly fail to modify the…
management fraud risk
management intentionally misstates financial statements
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