Chapter 13

Front 1

The five categories of audit tests auditors use to determine whether financial statements are fairly stated;

Back 1

Types of Tests

Front 2

The 5 types of tests include:

Back 2

1. Risk Assessment procedures
2. Tests of controls
3. Substantive tests of transactions
4. Analytical procedures
5. Tests of details of balances

Front 3

What is a combination of test of controls, substantive tests of transactions, analytical procedures, and tests of details of balances performed in response to risks of material misstatement identified by the auditor's risk assessment procedures

Back 3

Further audit procedures

Front 4

The second standard of field work requires the auditor to..

Back 4

obtain an understanding of the entity and its environment.

Front 5

What are audit procedures to test the effectiveness of controls in support of a reduced assessed control risk?

Back 5

Tests of controls

Front 6

The amount of additional evidence required for tests of controls depends on two things:

Back 6

1. The extent of evidence obtained in gaining the understanding of internal control
2. The planned reduction in control risk

Front 7

One way the auditor can verify recording of transactions is to perform...

Back 7

tests of controls.

Front 8

What are procedures designed to test for dollar misstatements that directly affect the correctness of the financial statement balances?

Back 8

Substantive tests

Front 9

What are used to determine whether all six transaction related audit objectives have been satisfied for each class of transaction?

Back 9

Substantive tests of transactions

Front 10

When auditors are confident that all transactions were correctly recorded in the journals and correctly posted, considering all 6 transaction related audit objectives...

Back 10

they can be confident that general ledger totals are correct.

Front 11

Both tests of controls and substantive tests of transactions are performed for..

Back 11

transactions in the cycle, not on the ending account balances.

Front 12

It is more efficient to do test of controls and ____ at the same time.

Back 12

substantive test of transactions

Front 13

What involves comparisons of recorded amounts to expectations developed by the auditor?

Back 13

Analytical procedures

Front 14

Analytical procedures may be performed to audit..

Back 14

an account balance.

Front 15

The two most important purposes of analytical procedures in the audit of account balances are to:

Back 15

1. indicate possible misstatements in the financial statements
2. Provide substantive evidence

Front 16

If auditors believe that analytical procedures indicate a reasonable possibility of misstatement..

Back 16

they may perform additional analytical procedures or decide to modify test of details of balances.

Front 17

When the auditor develops expectations using analytical procedures and concludes that the client's ending balances in certain accounts appear reasonable...

Back 17

certain tests of details of balances may be eliminated or sample sizes reduced.

Front 18

What are audit procedures testing for monetary misstatements to determine whether the eight balance related audit objectives have been satisfied for each significant account balance?

Back 18

Test of details of balances

Front 19

The primary focus on the test os details of balances is on..

Back 19

the balance sheet

Front 20

What forms the basis for the auditor's report on internal control over financial reporting for public companies?

Back 20

Tests of controls

Front 21

Several factors influence the auditor's choice of types of tests to select including:

Back 21

1. the avaliability of the eight types of evidence
2. the relative costs of each type of test
3. the effectiveness of internal controls
4. inherent risks

Front 22

What are the 8 types of evidence?

Back 22

1. Physical examination 2. Confirmation 3. Documentation 4. Observation 5. Inquiry 6. Reperformance 7. Analytical procedures 8. Recalculation

Front 23

More types of tests are used for ___ than any other type of test.

Back 23

tests of details of balances

Front 24

Only _____ involve physical examination ad confirmation.

Back 24

tests of details of balances

Front 25

_____ are made for every type of test.

Back 25

Inquiry

Front 26

_____ & _____ is used in every type of tests except for analytical procedures.

Back 26

Documentation & Reperformance

Front 27

____ are the least costly test.

Back 27

Analytical procedures

Front 28

_____ almost always cost considerably more than any of the other types of procedures.

Back 28

Tests of details of balances

Front 29

What is the combination of the types of tests to obtain sufficient appropriate evidence for a cycle?

Back 29

evidence mix

Front 30

The audit program for most audits is designed in three parts:

Back 30

1. tests of controls and substantive tests of transactions
2. substantive analytical procedures
3. test of details of balances

Front 31

When controls are effective and control risk is assessed as low, auditors put heavy emphasis on...

Back 31

tests of controls

Front 32

If control risk is assessed at a maximum, only ____ will be used.

Back 32

substantive tests of transactions

Front 33

Auditors follow a four step approach to reduce assessed control risk:

Back 33

1. Apply the transaction related audit objectives to the class of transactions being tested
2. Identify key controls that should reduce control risk for each audit objective
3. Develop appropriate tests of controls
4. Design substantive tests of transactions

Front 34

The design of ____ is normally the most difficult part of the entire planning process because it is subjective and requires considerable professional judgement.

Back 34

Tests of details of balances

Front 35

What are the 4 evidence decisions?

Back 35

1. Audit procedures
2. Sample size
3. Timing
4. Items to select

Front 36

What are the 4 phases of the audit?

Back 36

1. Plan and design an audit approach
2. Perform tests of controls and substantive tests of transactions
3. Perform analytical procedures and tests of details of balances
4. Complete the audit and issue audit report

Front 37

Even when all transaction realted audit objectives are met, the auditor will still rely primarily on substantive tests of balances to meet two balance related audit objectives:

Back 37

1. realizable value
2. rights and obligations

Front 38

What are the 6 transaction related audit objectives?

Back 38

1. occurrence 2. completeness 3. accuracy 4. posting and summarization 5. classification 6. timing

Front 39

What are the four presentation and disclosure related audit objectives?

Back 39

1. occurrence and rights and obligations
2. completeness
3. accuracy and valuation
4. classification and understandability

Front 40

Auditors must gather the following evidence for the financial statements as a whole during the completion phase:

Back 40

1. perform final analytical procedures
2. evaluate the going concern assumption
3. obtain a client representation letter
4. read information in the annual report to make sure that it is consistent with the financial statements