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19 Cards in this Set
- Front
- Back
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Incentives & pressures to commit a fraud
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- Falling profits
- Ongoing losses - Remuneration tied to earnings - Threat to take over - Pressure to meet market expectations |
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What is 'Audit Risk'?
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Risk that auditor's opinion is WRONG
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What is 'Inherent Risk'?
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Identification of accounts & related assertions most at risk of material misstatement
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What is 'Control risk'?
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Client's system of internal controls WON'T prevent or detect a material misstatement
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What is 'Detection risk'?
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Risk that the auditor's test procedures WON'T be able to detect the misstatement.
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What is a Modified & Qualified audit opinion?
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Significant misstatement
'except for' the effects of a matter, the financial report can be relied upon |
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What is a Modified & Unqualified audit opinion?
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When an emphasis of matter paragraph is used
*unqualified opinions can be unmodified (clean) too. |
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What is an Unmodified audit opinion?
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Conclude it's true and fair
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What is an Adverse opinion/ disclaimer of opinion?
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Auditor has evidence that they've identified misstatements individually or in aggregate
MORE SERIOUS |
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What is the audit risk formula?
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AR = IR, CR, DR
AR= High if IR & CR are Low and DR High AR = Low if IR & CR are High and DR Low |
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8 assertions are..?
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Occurrence
Completeness Accuracy Cut-off/timing Classification Existence Rights & Obligations Valuation & Allocation |
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Types of Audit evidence
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External confirmations
Documentary evidence Verbal evidence Computational evidence Physical evidence |
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2 types of external confirmations.
Positive confirmation and negative confirmation. How are they different? |
Positive - a letter sent by the auditor whether they AGREE OR DISAGREE
Negative - a letter sent by the auditor if they DISAGREE |
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5 Types of Evidence gathering procedures?
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Observation
Enquiry Recalculation Reperformance Analytical procedures |
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Definition of Substantive Testing?
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Procedures designed to detect material misstatements at the assertion level.
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5 Sampling methods
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Random Selection
Systematic Selection Haphazard selection Block selection Judgemental selection |
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8 Objectives of internal controls? (similar to assertions)
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Real
Recorded Valued Classified Summarised Posted Timely Inherent limitations of internal controls (human error) |
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Vouching is ?
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Accounting records to source documents
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Tracing is ?
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Source document to accounting records
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