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52 Cards in this Set

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What type of evidence should be gathered in testing controls?
Personal inquiries, Re-performing of client procedures, Review of documents
Which of the following is a type of substantive test:
Substantive tests of transactions
Comparing auditors expectations with recorded amounts is an example of:
Analytical procedures
Rank the following evidences in terms of lowest cost to the highest cost:
Analytical procedures, Test of controls, and Substantive tests of transaction
As internal controls become more effective, the level of substantive tests:
Decrease
Auditing standard__________ provides guidance for auditors of entities that transmit processes, maintain, or access significant information electronically.
AU 326, AU 101
When designing tests of details of balances for accounts receivable, an auditor should:
Perform analytical procedures, Indentify business risk, Assess control risk
Presentation and disclosure related audit objectives are conducted in ____________ of the audit process.
Phase IV
Phase IV of the audit process includes:
Evaluate results
A combination of different types of audit evidence in response to different levels of risk refers to:
Evidence mix
T/F
It is not necessary for an auditor to understand the entity or its environment if the entity's internal controls are adequate.
False
T/F
When testing for dollar misstatements, the auditor uses substantive tests.
True
T/F
The primary accounts associated with tests of details of balances are the revenue and expense accounts.
False
T/F
Different evidence has different costs of acquiring.
True
T/F
Analytical procedures provide direct evidence that there are material misstatements in the financial statements.
False
T/F
Auditors must rely more on test of controls when a substantial amount of audit evidence exists in electronic form.
True
T/F
The same audit tests should be used for every audit.
False
T/F
Different types of audit procedures are combined to perform an audit program.
True
T/F
There are ten phases to the audit process.
False
T/F
An auditor should evaluate results during Phase IV of the audit process.
True
Tests of controls
+ Substantive tests of Transactions
+ Analytical Procedures
+Tests of Detail Balances
_____________________
Sufficient appropriate evidence
Farther Audit Procedures

relates to the Audit Risk Model
AAR/(IR*CR)=PDR
make inquiries of appropriate personnel
Examine documents, records and reports
Observe control-related activities
Reperform client procedures
Are all examples of which type of test?
Tests of controls
What does additional evidence required for tests of controls depend on?
-the extent of the evidence obtained in gaining the understanding of internal control
-the planned reduction in control risk
Substantive tests are procedures designed to test what?
Dollar misstatements or monetary misstatements
Name 3 types of substantive tests
substantive tests of transactions, substantive analytical procedures, and tests of details of balance
name 6 transaction related audit objectives
recorded sales transactions exist
(occurrence)
existing sales transactions are recorded
(completeness)
(accuracy)
(classification)
(timing)
What is an analytical procedure?
Name an example
comparison of recorded amounts to expectations developed by the auditor.
i.e. the A/R balance is a debit balance
Name the 2 most important purposes of analytical procedures in the audit of account balances
-indicate possible misstatements in the financial statements
-provide substantive evidence
What do tests of details of balances focus on?
the ending ledger balances for both the balance sheet and income statement
The auditor looks for indication on duplicate sales invoices to see whether the invoices have been verified. This is an example of
a test of controls
Analytical procedures may be classified as primarily which kind of test?
Substantive test
The auditor faces a risk that the audit will not detect material misstatements that occur in the accounting process. To minimize this risk, the auditor relies primarily on what kind of test?
substantive tests
What order are these steps performed?
1) Determining the internal controls that should prevent or detect errors and fraud.
2) Identifying control deficiencies to determine their effect on the nature, timing, or extent of auditing procedures to be applied and suggestions to be made to the client.
3.) Determining whether the necessary internal control procedures are prescribed and are being followed. satisfactorily.
4) Considering the types of errors and fraud that can occur.
Considering the types of errors and fraud that can occur.
Determining the internal controls that should prevent or detect errors and fraud.
Determining whether the necessary internal control procedures are prescribed and are being followed.
Identifying control deficiencies to determine their effect on the nature, timing, or extent of auditing procedures to be applied and suggestions to be made to the client.
4,1,3,2
T/F
Tests of controls include observations of the proper segregation of duties
True
To support the auditors initial assessment of control risk below maximum, the auditor performs procedures to determine that the internal controls are operating effectively. what type of the audit procedure is the auditor performing?
Tests of controls
T/F
The primary objective of performing tests of controls is to obtain a reasonable degree of assurance that the client's internal controls are operating effectively on a consistent basis throughout the year.
True
Examining checks is which type of control audit procedure?
Test of control
Documentation, observation, inquires of the client and re-performance are all types of which audit procedure?
Tests of controls
Documentation, inquires of the client, re-performance and rec-calculation are all types of which audit procedure?
Substantive tests of transactions
Inquires of the client, and analytical procedures are all which type of audit procedure?
Analytical procedures
Physical Examination, Confirmation, Documentation, Inquires of the client, re-performance and re-calculation are all types of which audit procedure?
Tests of details of balances
T/F
One difference between procedures used to obtain an understanding of internal control and procedures used to test controls is that tests of controls are more extensive.
True
Which of the following is ordinarily designed to detect possible material dollar errors on the financial statements?
a. Tests of controls.
b. Analytical review procedures.
c. Computer controls.
d. None of the above
Analytical review procedures.
T/F
An exception in a test of control provides only an indication of the likelihood of monetary misstatements in the financial statements because tests of controls do not reveal whether monetary misstatements have actually occurred.
True
4) Which of the following ultimately determines the specific audit procedures necessary to provide an independent auditor with a reasonable basis for the expression of an opinion?
a. The audit program.
b. The auditor’s judgment.
c. Generally accepted auditing standards.
d. The auditor’s working papers.
The auditor’s judgment.
T/F
Under normal circumstances, there should be no variation in the audit evidence mix from cycle to cycle for a given audit engagement
False
Only _______ involve physical examination and confirmation.
a. tests of controls
b. tests of transactions
c. tests of balances
d. analytical procedures
tests of balances
T/F
The extent of tests of details of balances can be reduced when transaction-related audit objectives have been satisfied by tests of controls or substantive tests of transactions.
True
Which of the following is not a valid basis for omitting an audit test?
a. the difficulty and expense involved in testing a particular item.
b. the relative risk involved.
c. the degree of reliance on the relevant internal controls.
d. the relationship between the cost of obtaining evidence and its usefulness
the difficulty and expense involved in testing a particular item
T/F
If inherent risk is decreased from medium to low, tests of details of balances can be reduced.
True
Which of the following tests commonly occur together?
a. Substantive tests of transactions and tests of controls.
b. Substantive tests of transactions and obtaining an understanding of internal controls.
c. Analytical procedures and tests of controls.
d. Tests of controls and tests of details of balances.
Substantive tests of transactions and tests of controls
T/F
Analytical procedures are the least expensive type of audit test
True