AUD 2 Flashcards
The auditor is required to inform those charged with governance about significant misstatements discovered by the auditor and subsequently corrected by management.
The auditor is required to inform those charged with governance about significant misstatements discovered by the auditor and subsequently corrected by management.
Many operational and compliance related controls are not ordinarily relevant to an audit.
Many operational and compliance related controls are not ordinarily relevant to an audit.
A substantive procedure addresses the correctness of a particular financial statement amount or disclosure.
A substantive procedure addresses the correctness of a particular financial statement amount or disclosure.
when the planned level of the risk of material misstatement is at the maximum level, no tests of controls are performed.
when the planned level of the risk of material misstatement is at the maximum level, no tests of controls are performed.
An auditor’s assessment of control risk at below the maximum requires identification of specific internal controls that are likely to detect or prevent material misstatements and the testing of those controls. If the cost of performing the tests of controls exceeds the benefit derived (i.e., the reduction in substantive testing), the tests of controls would not be performed and the assessment of control risk would not be reduced below the maximum.
An auditor’s assessment of control risk at below the maximum requires identification of specific internal controls that are likely to detect or prevent material misstatements and the testing of those controls. If the cost of performing the tests of controls exceeds the benefit derived (i.e., the reduction in substantive testing), the tests of controls would not be performed and the assessment of control risk would not be reduced below the maximum.
auditing procedures suggests that when no audit trail exists an auditor should use the observation and inquiry techniques.
auditing procedures suggests that when no audit trail exists an auditor should use the observation and inquiry techniques.
Tests of controls directed toward effectiveness or operation of a control would ordinarily include inquiries, inspections of documents, observation, and reperformance of the application of a control. Thus, both reperformance and observation are used by an auditor to assess control risk.
Tests of controls directed toward effectiveness or operation of a control would ordinarily include inquiries, inspections of documents, observation, and reperformance of the application of a control. Thus, both reperformance and observation are used by an auditor to assess control risk.
Assessing control risk at a low level involves (1) identifying specific controls relevant to specific assertions that are likely to prevent or detect material misstatements in those assertions, and (2) performing tests of controls to evaluate the effectiveness of such controls.
Assessing control risk at a low level involves (1) identifying specific controls relevant to specific assertions that are likely to prevent or detect material misstatements in those assertions, and (2) performing tests of controls to evaluate the effectiveness of such controls.
The PCAOB (specifically, AS Section 1220) requires the engagement quality reviewer be an “associated person” of a registered public accounting firm and have competence, independence, integrity, and objectivity to perform the engagement quality review.
The PCAOB (specifically, AS Section 1220) requires the engagement quality reviewer be an “associated person” of a registered public accounting firm and have competence, independence, integrity, and objectivity to perform the engagement quality review.
The work of internal auditors may affect the nature, timing and extent of the audit, including (1) procedures the auditor performs when obtaining an understanding of the entity’s internal control, (2) procedures the auditor performs when assessing risk, and (3) substantive procedures the auditor performs.
The work of internal auditors may affect the nature, timing and extent of the audit, including (1) procedures the auditor performs when obtaining an understanding of the entity’s internal control, (2) procedures the auditor performs when assessing risk, and (3) substantive procedures the auditor performs.
A material weakness is a significant deficiency (or combination of significant deficiencies) that results in a reasonable possibility that a misstatement of at least a material amount
A material weakness is a significant deficiency (or combination of significant deficiencies) that results in a reasonable possibility that a misstatement of at least a material amount
proper segregation of the functional responsibilities requires separation of (1) authorization, (2) recording, and (3) custodial functions. Incompatible functions are those that place any person in a position both to perpetrate and to conceal errors and irregularities.
proper segregation of the functional responsibilities requires separation of (1) authorization, (2) recording, and (3) custodial functions. Incompatible functions are those that place any person in a position both to perpetrate and to conceal errors and irregularities.
Tracing looks at a financial document and traces the path of that document all the way to the financial statements. Vouching goes the opposite direction.
Tracing looks at a financial document and traces the path of that document all the way to the financial statements. Vouching goes the opposite direction.
A voucher is often a prenumbered form used in the accounts payable department to standardize and enhance a company’s internal control over payments to its vendors and service providers. A voucher is usually prepared after a vendor’s invoice has been matched with the company’s purchase order and receiving report.
A voucher is often a prenumbered form used in the accounts payable department to standardize and enhance a company’s internal control over payments to its vendors and service providers. A voucher is usually prepared after a vendor’s invoice has been matched with the company’s purchase order and receiving report.
A voucher is usually prepared after a vendor’s invoice has been matched with the company’s purchase order and receiving report. In addition to attaching the three items to the voucher, the following information is also entered on the voucher: payee/vendor name, discount terms, the amount and date to be paid, the general ledger account numbers to be charged, and the authorizing signatures. The voucher is then recorded in the voucher register.
The unpaid vouchers provide the detail for the total amount reported as vouchers payable or accounts payable.
A voucher is usually prepared after a vendor’s invoice has been matched with the company’s purchase order and receiving report. In addition to attaching the three items to the voucher, the following information is also entered on the voucher: payee/vendor name, discount terms, the amount and date to be paid, the general ledger account numbers to be charged, and the authorizing signatures. The voucher is then recorded in the voucher register.
The unpaid vouchers provide the detail for the total amount reported as vouchers payable or accounts payable.
