Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
24 Cards in this Set
- Front
- Back
|
What can auditors conclude if they verify that sales and cash receipts have been rocrded correctly? |
The ending balances in AR and sales are correct. |
|
|
Substantive Tests |
Procedures designed to test for dollar misstatements that directly affect the correctness of financial statement balances. |
|
|
Used to determine whether all six transaction -related audit objectives have been satisfied for each class of transaction. |
Substantive Tests of Transactions |
|
|
What are the two most important purposes of using analytical procedures during audit of account balances? |
1) Indicate possible misstatemetns in the financial statements.
2) Provides substantive evidence |
|
|
Tests of controls form the basis for the auditor's report on internal control over financial reporting.
T/F |
True |
|
|
Which procedures emphasize the overall reasonableness of transactions and the general ledger balance? |
Analytical Procedures |
|
|
Which tests are used to verify transactions recorded in teh journals and posted in the general ledger? |
Substantive tests of transactions |
|
|
Reorder the tests in order of cost, lowest first:
Tests of Controls Tests of details of balances Substantive tests of transactions Analytical procedures Risk assessment procedures, incl for Int Control |
Analytical procedures Risk assessment procedures, incl for Int Control Tests of Controls Substantive tests of transactions Tests of details of balances |
|
|
Even though tests of controls support the effectiveness of controls, auditors may not reduce substantive tests performed.
T/F |
False |
|
|
The combination of the types of tests to obtain sufficient appropriate evidence for a cycle; there are likely to be variations in the mix from cycle to cycle depending on the circumstances of the audit. |
Evidence Mix |
|
|
Re-order to show the four-step approach auditors use to reduce assessed control risk:
Develop appropriate tests of controls for all internal controls. Apply transaction related audit objectives to the class of transactions being tested. Design appropriate substantive tests. Identify key controls that should reduce control risk. |
Apply transaction related audit objectives to the class of transactions being tested. Identify key controls that should reduce control risk. Develop appropriate tests of controls for all internal controls. Design appropriate substantive tests. |
|
|
Pland and Design an Audit Approach Perform tests of controls and substantive tests of transactions Perform Analytical Procedures and tests of details and balances Complete the audit and issue an audit report |
Four phases of the audit process |
|
|
Occurence Completeness Accuracy Posting and summarization Classification |
Transaction-related audit objectives |
|
|
Existence Completeness Accuracy Classification Cutoff Detail Tie-in Realizable Value Rights and obligations |
Balance-related audit objectives |
|
|
Occurance and rights and obligations Completeness Accuracy and valuation Classification and understandability |
Presentation and disclosure related audit objectives |
|
|
List the evidence gathered for:
Tests of Controls |
Inspection Observation Inquiries of the Client Reperformance |
|
|
List the evidence gathered for:
Substantive tests of transactions |
Inspection Inquiries of the Client Reperformance Recalculation |
|
|
List the evidence gathered for:
Analytical Procedures |
Inquiries of the Client Analytical Procedures |
|
|
List the evidence gathered for:
Tests of details of blances |
Physical Examination Confirmation Inspection Inquiries of the Client Reperformance Recalculation |
|
|
Why are tests of controls and substantive tests of transactions often performed 2-3 months before the blance sheet date? |
The results are a major determinant of the extent of tests of details of blances |
|
|
Which phase do the following steps relate to?
Perform Final Analytical Procedures Evaluate the going concern assumption Obtain a client rep letter Read info in the annual report to make sure it is consistent with fin stmts Communicate with audit committee and management |
Phase IV Complete the audit and issue an audit report |
|
|
Which phase do the following steps relate to?
Perform analytical procedures Perform tests of key items Perform additional tests of details of balances |
Phase III Perform analytical procedures and tests of details of blances |
|
|
Which phase do the following steps relate to?
Perform substantive tests of transactions Assess likelihood of misstatemetns in financial statements |
Phase II Perform tests of controls and substantive tests of transactions |
|
|
Which phase do the following steps relate to?
Perform initial planning Understand client's business and industry Assess client business risk Preliminary analytical procedures Set materiality and assess acceptable audit and inherent risk Understand internal control Gather info to assess fraud risks Develop Audit strategy |
Phase I Plan and design an audit approach |
