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Auditing > Point of Emphasis - Final Exam > Flashcards

Point of Emphasis - Final Exam Flashcards

1
Q

Components of Internal Controls

A
  1. Control Environment (Umbrella)
  2. Risk Assessment
  3. Control Activities
  4. Information & Communication
  5. Monitoring
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2
Q

Audit Risk Model

A

[PDR=AAR/(IR x CR)]

  • Planned Detection Risk (PDR)
  • Acceptable Audit Risk
  • Inherent Risk
  • Control Risk
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3
Q

Control Environment (Umbrella)

A

The actions, policies, and procedures concerning internal control.

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4
Q

Risk Assessment

A

Analysis of risks concerning the preparation of financial statements.

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5
Q

Control Activities

A

Policies and procedures to reduce risks.

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6
Q

Information & Communication

A

Methods used to initiate, record, process, and report transactions and to maintain accountability for assets.

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7
Q

Monitoring

A

Assessing quality of internal control performance to determine that controls are operating as intended.

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8
Q

Planned Detection Risk

A

The risk that audit evidence for a segment will fail to detect misstatements.

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9
Q

Acceptable Audit Risk

A

How willing the auditor is to accept misstatements after the audit is completed and an unqualified audit opinion has been issued.

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10
Q

Inherent Risk

A

Assessment concerning material misstatement before considering the effectiveness of internal control.

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11
Q

Control Risk

A

Assessment of the risk that misstatement could occur in an assertion and not be prevented or detected by internal controls.

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12
Q

If Acceptable Audit Risk (AAR) ↑, then Planned Audit Evidence…

A

Decreases ↓ (Inverse)

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13
Q

If Acceptable Audit Risk (AAR) ↓, then Planned Audit Evidence…

A

Increase ↑ (Inverse)

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14
Q

If Inherent Risk (IR) ↑, then Planned Audit Evidence…

A

Increase ↑ (Direct)

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15
Q

If Inherent Risk (IR) ↓, then Planned Audit Evidence…

A

Decrease ↓ (Direct)

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16
Q

If Planned Detection Risk (PDR) ↑, then Planned Audit Evidence…

A

Decrease ↓ (Inverse)

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17
Q

If Planned Detection Risk (PDR) ↓, then Planned Audit Evidence…

A

Increase ↑ (Inverse)

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18
Q

If Control Risk (CR) ↓, then Planned Audit Evidence…

A

Decrease ↓ (Direct)

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19
Q

If Control Risk (CR) ↑, then Planned Audit Evidence…

A

Increase ↑ (Direct)

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20
Q

If Acceptable Audit Risk (AAR) ↑, then Planned Detection Risk (PDR)…

A

Increase ↑ (Direct)

21
Q

If Acceptable Audit Risk (AAR) ↓, then Planned Detection Risk (PDR)…

A

Decrease ↓ (Direct)

22
Q

If Inherent Risk (IR) ↓, then Planned Detection Risk (PDR)…

A

Increase ↑ (Inverse)

23
Q

If Inherent Risk (IR) ↑, then Planned Detection Risk (PDR)…

A

Decrease ↓ (Inverse)

24
Q

If Control Risk (CR) ↓, then Planned Detection Risk (PDR)…

A

Increase ↑ (Inverse)

25
Q

If Control Risk (CR) ↑, then Planned Detection Risk (PDR)…

A

Decrease ↓ (Inverse)

26
Q

If Planned Detection Risk (PDR) ↓, then Planned Audit Evidence…

A

Increase ↑ (Inverse)

27
Q

If Planned Detection Risk (PDR) ↑, then Planned Audit Evidence…

A

Decrease ↓ (Inverse)

28
Q

Types of Audit Reports

A
  1. Standard Unqualified Opinion
  2. Unqualified Opinion with Explanatory Paragraph of Modified Wording
  3. Qualified Opinion
  4. Adverse Opinion
  5. Disclaimer of Opinion
29
Q

Standard Unqualified Opinion

A

Immaterial

30
Q

Unqualified Opinion with Explanatory Paragraph of Modified Wording

A

Immaterial/Material
Substantial doubt about going concern.
Inconsistency of GAAP
Emphasis of other matters

31
Q

Qualified Opinion

A

Material

Scope limitation and/or departure from GAAP.

32
Q

Adverse Opinion

A

Highly material

Auditor has knowledge*

33
Q

Disclaimer of Opinion

A

Highly material
Severe scope limitation*
Nonindependent relationship.

34
Q

Types of Confirmations for Accounts Receivable

A
  1. Positive Confirmation
  2. Blank Confirmation
  3. Invoice Confirmation
  4. Negative Confirmation
35
Q

Positive Confirmation

A

Confirmation request if correct or incorrect.

36
Q

Blank Confirmation

A

Request to provide information.

37
Q

Invoice Confirmation

A

Confirmation of individual invoice but not entire account receivable balance.

38
Q

Negative

A

Confirmation request only if stated amount is incorrect.

39
Q

Transaction-Related Audit Objectives for Sales

A
  1. Occurrence
  2. Completeness
  3. Accuracy
  4. Posting & Summarization
  5. Classification
  6. Timing
40
Q

Transaction-Related Audit Objectives for Sales: Occurrence

A

Recorded sales are for shipments actually made to non-fictitious customers. (Vouching)

41
Q

Transaction-Related Audit Objectives for Sales: Completeness

A

Existing sales transactions are recorded. (Tracing)

42
Q

Transaction-Related Audit Objectives for Sales: Accuracy

A

Recorded sales are for the amount of goods shipped and are correctly billed and recorded.

43
Q

Transaction-Related Audit Objectives for Sales: Posting & Summarization

A

Sales transactions are correctly included in the accounts receivable master file and are correctly summarized.

44
Q

Transaction-Related Audit Objectives for Sales: Classification

A

Sales transactions are correctly classified.

45
Q

Transaction-Related Audit Objectives for Sales: Timing

A

Sales are recorded on the correct dates.

46
Q

The Fraud Triangle

A
  1. Incentives/Pressures
  2. Opportunities
  3. Attitudes/Rationalization
47
Q

The Fraud Triangle: Incentives/Pressures - Example

A

Significant declines in customer demand for entity’s goods/services.

48
Q

The Fraud Triangle: Opportunities - Example

A

Weak internal controls

49
Q

The Fraud Triangle: Attitudes/Rationalization - Example

A

Inappropriate or ineffective communication and support of the entity’s values.

Auditing (12 decks)

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