A3 Flashcards
Factors that change the supply
ECOST
Expectation of a change in price
Cost to produce
Other goods price changes
Subsidies changes
Technological improvements
list of the walkthrough procedures usually performed in an issuer’s integrated audit
Inquiry, observation, inspection of relevant documentation, and reperformance of controls.
An auditor would most likely perform risk-assessment procedures to
evaluate the design of relevant controls when obtaining an initial understanding of the system of internal control sufficient to assess the risk of material misstatement of the financial statements.
Substantive testing is an audit procedure designed to
detect material misstatements
the auditor should usually rely on audit evidence that is
persuasive
what is the auditor’s direct personal knowledge
examination, re-computation, inspection, and observation
professional judgment
evaluate the sufficiency and appropriateness of audit evidence. For example the amount of evidence required and how relevant it is.
Professional requirements
inform the auditor of their minimum responsibilities in the audit (Part of professional standards)
Substantive tests are
concerned with dollar amounts and consist of tests of details of transactions and balances and analytical procedures
Accounts that are less predictable
What accounts tend to be more predictable more predictable than balance sheet accounts
Income statement accounts.
To determine whether transactions have been recorded
the auditor should trace from the source documents to the accounting records (general ledger, trial balances, etc.).
Reperformance occurs when
an auditor independently performs procedures or controls that were originally performed as part of an entity’s internal control.
If there are few transactions in an account what test is ran
Test of detail
Analytical procedures are used for
Accounts that are more predictable, Focuses on the comparison between accounts and their balances
*developing an expectation (based on plausible relationships) and comparing recorded amounts or ratios based on recorded amounts to that expectation
Most of the time is will be Income Statement accounts
From accounting records to source document
Helps detect overstatements (Tests existence)
From source document to accounting records
Helps with Completeness that all transactions are included
Analytical procedures applied during the final review stage should be used to
determine whether adequate evidence has been gathered in response to unusual or unexpected balances identified during the audit.
By using statistical sampling
the auditor can quantify sampling risk to assist in limiting it to a level considered acceptable.
The efficiency of the audit
is related to the risk of incorrect rejection and the risk of assessing control risk too high.
the risk of incorrect acceptance and the risk of assessing control risk too low relate to
effectiveness of an audit
Attribute sampling is used to
Test controls
Nonsampling risk includes
the auditor selecting inappropriate auditing procedures, using inappropriate audit evidence, and failure by the auditor to recognize misstatements in documents examined.
If the auditor is not able to test the control as planned, nor perform alternative procedures
the auditor should treat the item as a deviation from the prescribed control in their documentation.
What has no effect on sample size
Population size is not an issue in determining a sample size,