Assessing & Developing A Planned Response

Question 1

What does the “Nature” of the audit refer to?

Answer 1

Type

Question 2

What part of NET is this conveying?
Perform a specified procedure….

Answer 2

Nature

Question 3

What part of NET is this conveying?
On a specified number of records from the population

Answer 3

Extent

Question 4

What part of NET is this conveying?
As of interim date

Answer 4

Timing

Question 5

What does the “Extent” of the audit refer to?

Answer 5

Scope

Question 6

What does the “Timing” of the audit refer to?

Answer 6

When

Question 7

What further audit procedure would be necessary?
Auditor’s risk assessment is based on operating effectiveness of internal controls?

Answer 7

TOC

Question 8

What further audit procedure would be necessary?
Substantive procedures alone are insufficient

Answer 8

TOC

Question 9

What procedures are required to detect material misstatements?

Answer 9

Substantive procedures

Question 10

Why are substantive procedures required?

Answer 10

Inherent limitations to internal controls

Question 11

What is the amount set by the auditor at less than materiality for the financial statements as a whole

Answer 11

Performance Materiality

Question 12

What does performance materiality decide?

Answer 12

NET

Question 13

What is the maximum error in a population that the auditor is willing to accept?

Answer 13

Tolerable misstatement

Question 14

How does tolerable misstatement relate to performance materiality?

Answer 14

TM is application of PM in a sampling procedure

Question 15

What is the C in CRIME?

Answer 15

Control Environment

Question 16

What is the R is CRIME?

Answer 16

Risk Assessment

Question 17

What is the I in CRIME?

Answer 17

Information and communication system

Question 18

What is the M in CRIME?

Answer 18

Monitoring

Question 19

What is the E in CRIME?

Answer 19

Existing controls

Question 20

What component of internal control?
Setting the tone of the organization

Answer 20

Control environment

Question 21

What component of internal control?
Identification by management of the risks relevant to the preparation of the FS

Answer 21

Risk assessment

Question 22

What component of internal control?
Methods used to classify and report transactions and communicate roles and responsibilities

Answer 22

Information

Question 23

What component of internal control?
Procedures established to assess the quality of IC over time

Answer 23

Monitoring

Question 24

What component of internal control?
Policies and procedures established to ensure that management objectives are carried out

Answer 24

Existing controls

Question 25

As the acceptable level of DR decreases, the assurance provided from substantive tests should _______

Answer 25

increase

Question 26

RMM Formula

Answer 26

IR * CR

Question 27

AR Formula

Answer 27

RMM * DR

Question 28

Sample deviation rate

Answer 28

Number of errors / Sample Size

Question 29

Upper deviation rate

Answer 29

Sample deviation + Allowance

Question 30

Point estimate

Answer 30

Sample error + recorded balance

Question 31

PPS Sampling Sampling interval

Answer 31

Tolerable misstatement/reliability factor

Question 32

Analytic procedures are required during the _______ and _____ phase

Answer 32

planning, final review

Question 33

Working capital

Answer 33

current assets - current liabilities

Question 34

Current ratio

Answer 34

Current assets/Current liabilities

Question 35

Quick ratio

Answer 35

current assets (not inventory)/current liabilites

Question 36

liquidity ratio

Answer 36

short term ability to pay cash

Question 37

Activity ratio

Answer 37

how effectively an enterprise is using assets

Question 38

AR turnover

Answer 38

Net Sales/ Average AR

Question 39

Days sales in AR

Answer 39

Ending AR/ (Sales/365)

Question 40

Inventory turnover

Answer 40

COGS/ Average inventory

Question 41

Days in inventory

Answer 41

Ending inventory/(COGS/365)

Question 42

Operating cycle

Answer 42

days sales in AR + Days in inventory

Question 43

Working capital turnover

Answer 43

Sales/ Average Working Capital

Question 44

Asset turnover

Answer 44

Sales/ Average total assets

Question 45

What ratio indicates number of days between the acquisition of inventory and the realization of cash from selling the inventory

Answer 45

operating cycle

Question 46

Profitability ratio

Answer 46

success or failure

Question 47

Net profit margin

Answer 47

Net income/Net Sales

Question 48

Net operating margin

Answer 48

Net operating income/Net Sales

Question 49

Gross profit margin

Answer 49

Net sales - COGS/ Net sales

Question 50

Return on asset

Answer 50

Net income/Average total assets

Question 51

Debt to equity

Answer 51

Total liabilities/Total equity

Question 52

Total Debt ratio

Answer 52

Total liabilities/Total assets

Question 53

When would positive confirms be used? ______, _______, ______

Answer 53

Large receivables, higher risk, weak IC

Question 54

Positive confirms require the customer to respond? T/F

Answer 54

True

Question 55

Negative confirms require the customer to respond? T/F

Answer 55

False

Question 56

Kiting

Answer 56

Check drawn on one bank account is deposited in another and no record of first disbursement is made

Question 57

Lapping

Answer 57

today's cash covers yesterday's theft

Question 58

Unqualified opinion

Answer 58

Issuer

Question 59

Unmodified opinion

Answer 59

Nonissuer