AUD (Misc. 4) Flashcards
(34 cards)
Analytical procedures are most appropriate when testing which of the following types of transactions?
A Payroll and benefit liabilities
B Acquisitions and disposals of fixed assets
C Operating expense transactions
D Long-term debt transactions
C. operating expense (i.e. income statement) transactions. Relationships involving income statement accounts tend to be more predictable than relationships involving only balance sheet accounts because income statement accounts represent transactions over a period of time, whereas balance sheet accounts represent amounts as of a point in time.
Extracting useful information from a pool of voluminous data to identify patterns and anomalies to assist in auditing and assurance engagements is known as:
A SaaS
B Blockchain
C Audit data analytics
D Audit data targeting
Audit Data Analytics (ADA) is the practice of making use of data analytics tools to make sense out of big data involved in audit and similar assurance engagements through visualizing results in a graphical, convenient and fast manner.
Which of the following factors would least influence an auditor’s consideration of the reliability of data for purposes of substantive analytical procedures?
A Whether the data was processed in an IT system or in a manual accounting system
B Whether there were controls over the preparation of the data
C Whether the data used was comparable
D Whether the data was obtained from independent sources outside the entity or from sources within the entity
Whether the data was processed in an IT system or in a manual accounting system generally would not influence the auditor’s consideration of the reliability of data for purposes of analytics. The reliability of data is influenced by its source and nature and is dependent on the circumstances under which it is obtained.
A primary advantage of using generalized audit software packages to audit the financial statements of a client is that the auditor may
A Access information stored on computer files while having a limited understanding of the client’s hardware and software features
B Consider increasing the use of substantive tests of transactions in place of analytical procedures
C Substantiate the accuracy of data through self-checking digits and hash totals
D Reduce the level of required tests of controls to a relatively small amount
A.
One of the reasons for using generalized audit software (GAS) is that it enables the auditor to gain access and test information stored in the client’s files without having to acquire a complete understanding of the client’s IT system.
Which of the following are components of a relational database?
A Tables, class hierarchies, foreign key.
B Tables, primary key, attributes.
C Object classes, primary key, attributes.
D Object classes, class hierarchies, foreign key.
B.
A relational database organizes data into tables (also called relations), where each table represents an entity and consists of rows (records) and columns (fields or attributes). The attributes define the types of data stored in each column. A primary key is a unique identifier for each row in a table and is essential to maintain entity integrity. These three components—tables, primary keys, and attributes—form the foundation of a relational database structure and enable the efficient organization and retrieval of related data.
Management’s acknowledgment of their responsibility for the preparation and fair presentation of the financial statements (part of the premise on which an audit in accordance with US GAAS is conducted), include all of the following except
A. Knowledge of US GAAS related to the financial statements
B. Inclusion of an adequate description of the applicable financial reporting framework in the financial statements
C. Identification of the applicable financial reporting framework, in the context of any relevant laws or regulations
D. The preparation and fair presentation of the financial statements in accordance with the applicable financial reporting framework
A Knowledge of US GAAS related to the financial statements
Projections indicate that the economy is entering a slowdown. What is the expected outcome in the near future?
A Inflationary pressures.
B Increasing demand for credit.
C Wage hikes.
D A drop in interest rates.
a drop in interest rates
Summary statistics used to describe the data are what type of analytics
Descriptive
An auditor may decide not to test controls related to certain assertions because the auditor believes:
A. More emphasis on tests of controls than substantive tests is warranted.
B. Considering the relationship of assertions to specific account balances is more efficient.
C. Substantive procedures alone will provide sufficient appropriate evidence to support the assertions.
D. Sufficient appropriate evidence to support the assertions is not likely to be available.
Choice “C” is correct. An auditor may decide to forego testing controls because the auditor believes substantive procedures alone will provide sufficient appropriate audit evidence to support such assertions.
In attribute sampling, a 25% change in which of the following factors will have the smallest effect on the size of the sample?
A. Number of items in the population.
B. Planned assessed level of control risk.
C. Degree of assurance desired.
D. Tolerable rate of deviation.
Number of items in the population.
As long as the population is large enough, population size has virtually no impact on sample size.
The risk of incorrect acceptance is relevant for ___ tests of details rather than ___ tests.
substantive tests rather than tests of controls
In determining the sample size for a test of controls, an auditor should consider the likely rate of deviations, the allowable risk of assessing control risk too low, and the:
A. Population size.
B. Risk of incorrect acceptance.
C. Nature and cause of deviations.
D. Tolerable deviation rate.
D. Tolerable Deviation Rate
A company’s financial reporting system has a process management feature to provide workflow control. This feature allows the division accounting staff to input and review data and send the data to the company’s corporate office for final review and approval. What security access, if any, should be granted to the division accounting staff once the data has been sent to the corporate office for approval?
A. No access.
B. Both read and write.
C. Write but not read.
D. Read but not write.
D. Read but not write.
An auditor should consider which of the following when evaluating the ability of a company to continue as a going concern?
A. Future assurance services.
B. A lawsuit for which judgment is not anticipated for 18 months.
C. Management’s plans for disposal of assets.
D. Audit fees.
C. Management’s plans for disposal of assets.
If the recorded amount is greater than the sampling interval, then…
the projected misstatement = the actual misstatement.
All material weakness and significant deficiencies identified in internal control of an audit of a non-issuer is required to be communicated…
in writing
within 60 days of the audit report release date
to management and those charged with governance
How to vouch additions to the fixed asset accounts (records)?
examine internal documents (source) (asset requisition form)
examine external documents (invoice)
inspect the actual asset (source)
What does this test?
Trace a sample of fixed asset purchase requisitions (source) to receiving reports (source) and the fixed asset sub ledger (records)
completeness of PPE
What does this test?
Review the related repair & maintenance expense accounts to test
completeness of asset additions
2 transactions for every sale in Perpetual Inv system
Record the sale
Dr Cash/AR
Cr Sales
Record the relief of inventory
Dr COGS
Cr Inventory
If the client is the consignee, is the inventory included or excluded?
Excluded from the FS
If the client is the consignor, is the inventory included or excluded?
Included in the FS
What sampling is used when the expected occurrence rate is very low?
Discovery Sampling
What sampling gives a greater chance of selecting larger items that could contain misstatements
Monetary Unit Sampling
