AUD 3 Flashcards
The Professional Standards require that the working papers show that the accounting records agree or reconcile with the financial statements.
The Professional Standards require that the working papers show that the accounting records agree or reconcile with the financial statements.
appropriate evidence is both relevant and reliable.
appropriate evidence is both relevant and reliable.
externally generated documents received directly by the auditor are considered more reliable evidence than internally generated evidence.
externally generated documents received directly by the auditor are considered more reliable evidence than internally generated evidence.
agreed-upon procedures report includes a statement disclaiming an opinion on the sufficiency of procedures
agreed-upon procedures report includes a statement disclaiming an opinion on the sufficiency of procedures
agreed-upon procedures reports include a list of the procedures performed (or reference thereto) and findings.
agreed-upon procedures reports include a list of the procedures performed (or reference thereto) and findings.
the professional standards require that the auditor discuss with management its policies and procedures for identifying and evaluating litigation.
the professional standards require that the auditor discuss with management its policies and procedures for identifying and evaluating litigation.
The requirement is to identify which parties should reach an understanding on the limits of materiality for purposes of a lawyer’s response to an auditor’s inquiry concerning litigation, claims, and assessments. AU-C 501 states that legal counsel’s response may be limited to matters that are considered individually or collectively material to the financial statements, such as when the entity and auditor have reached an understanding on the limits of materiality for this purpose and management has communicated such understanding to the legal counsel.
The requirement is to identify which parties should reach an understanding on the limits of materiality for purposes of a lawyer’s response to an auditor’s inquiry concerning litigation, claims, and assessments. AU-C 501 states that legal counsel’s response may be limited to matters that are considered individually or collectively material to the financial statements, such as when the entity and auditor have reached an understanding on the limits of materiality for this purpose and management has communicated such understanding to the legal counsel.
when evaluating accounting estimates an auditor’s objectives are to obtain sufficient appropriate audit evidence that (1) all material accounting estimates have been developed, (2) those accounting estimates are reasonable, and (3) those accounting estimates are in conformity with GAAP.
when evaluating accounting estimates an auditor’s objectives are to obtain sufficient appropriate audit evidence that (1) all material accounting estimates have been developed, (2) those accounting estimates are reasonable, and (3) those accounting estimates are in conformity with GAAP.
subsequent events affecting the realization of assets ordinarily will require adjustment of the financial statements because such events typically represent the culmination of conditions that existed at the balance sheet date.
subsequent events affecting the realization of assets ordinarily will require adjustment of the financial statements because such events typically represent the culmination of conditions that existed at the balance sheet date.
Type 2 subsequent events provide evidence with respect to conditions that did not exist at the date of the balance sheet being reported on but arose subsequent to that date. Type 2 events do not require financial statement adjustment. However, these events may be disclosed to keep the financial statements from being misleading.
Type 2 subsequent events provide evidence with respect to conditions that did not exist at the date of the balance sheet being reported on but arose subsequent to that date. Type 2 events do not require financial statement adjustment. However, these events may be disclosed to keep the financial statements from being misleading.
statistical sampling helps the auditor to: (1) design an efficient sample, (2) measures the sufficiency of the evidential matter obtained, and (3) evaluate the sample results (AICPA Audit Sampling Guide).
statistical sampling helps the auditor to: (1) design an efficient sample, (2) measures the sufficiency of the evidential matter obtained, and (3) evaluate the sample results (AICPA Audit Sampling Guide).
The risk of incorrect acceptance and the risk of assessing control risk too low relate to the effectiveness of an audit.
The risk of incorrect acceptance and the risk of assessing control risk too low relate to the effectiveness of an audit.
the risks of incorrect acceptance and assessing control risk too low relate to the effectiveness of an audit in detecting an existing material misstatement.
the risks of incorrect acceptance and assessing control risk too low relate to the effectiveness of an audit in detecting an existing material misstatement.
statistical sampling accounting applications are either based on variables sampling or attribute sampling. Variables sampling is measurement of a continuous variable (i.e., a variable such as number of items in inventory or amount of accounts receivable). The variable being estimated can take on a continuum of values (e.g., zero to infinity). Variable sampling is based upon the normal distribution. Attribute sampling is based on the binomial distribution and sample items must be binary in nature (i.e., right or wrong, correct or incorrect, etc.) Attribute sampling is most applicable to tests of compliance and variables sampling is most applicable to substantive tests.
statistical sampling accounting applications are either based on variables sampling or attribute sampling. Variables sampling is measurement of a continuous variable (i.e., a variable such as number of items in inventory or amount of accounts receivable). The variable being estimated can take on a continuum of values (e.g., zero to infinity). Variable sampling is based upon the normal distribution. Attribute sampling is based on the binomial distribution and sample items must be binary in nature (i.e., right or wrong, correct or incorrect, etc.) Attribute sampling is most applicable to tests of compliance and variables sampling is most applicable to substantive tests.
The audit report explicitly states that the examination of evidence is made on a test basis and implicitly assumes consistent application of accounting principles.
The audit report explicitly states that the examination of evidence is made on a test basis and implicitly assumes consistent application of accounting principles.
