Preliminary and Planning Phase Flashcards
What is the audit process?
- Preliminary phase
- Planning phase
- Gathering of audit evidence
- Concluding
What are the preliminary phase activities?
Those done by the auditor to determine the acceptability of a client.
What is audit risk?
The possibility of an auditor expressing an inappropriate opinion on an entity’s fair presentation
What are the 2 levels that an auditor must assess risk of material misstatement on?
Overall financial level
Assertion level
What are risks at overall financial level?
Pervasive risks that affect various assertions simultaneously
What are risks at assertion level?
Risks that affect a single transaction or balance
What are material misstatements?
Misstatements that individually or in aggregate could reasonably be expected to influence users’ decisions.
What are the 3 levels of materiality?
- Planning materiality
- Performance materiality
- Final materiality
What is planning materiality?
The determination of the total amount of overall misstatement that will be tolerated.
What is performance materiality?
The determination for specific account balances or classes of transactions.
What is final materiality?
Materiality set at the concluding stage of an audit and is the level against which identified, uncorrected misstatements will be judged.
What are substantive procedures?
Procedures used by the auditor to obtain evidence to detect material misstatement.
What are the 2 types of substantive procedures?
- Tests of detail
- Analytical review procedures
What are the 4 methods of sample selection?
Random sampling
Systematic sampling
Haphazard sampling
Block sampling
What is audit evidence?
The information used by the auditor to arrive at the conclusions on which the auditor’s opinion is based.
