AUD-Professional Standards Flashcards
(33 cards)
Gross Margin%=
Current ratio=
Inventory turnover=
Return on Equity=
Gross Margin%= Sales - cogs/sales
Current ratio= current asset/current liability
Inventory turnover= cogp/average inventory
Return on Equity= net income/shareholders’ equity
Definition of GASS?
Before it was the 10 specific criteria, now it is replaced by the 7 principles as the Statements on Auditing Standards issued by the Auditing Standards Board.
What is “likely misstatement”
A known misstatement of management
Procedures performed to evaluate control risk:
Inquiry, inspection, reperformance, and observation.
Procedures used for substantive testing:
Analysis, confirmation and comparison
Control activities include?
Physical controls Information processing Authorization Review of performance Segregation of duties
The control environment includes?
The control environment includes integrity and ethical values, commitment to competence, board of directors or audit committee participation, management’s philosophy an operating style, organizational structure, assignment of authority and responsibility, and human resource policies and practices.
The auditor may use internal auditors to provide direct assistant in performing?
- Substantive tests, including analytical procedures and/or tests of details
- Tests of controls
Def of sampling risk
Sampling risk arises from possibility that, when a substantive test is restricted to a sample, conclusions might be different that if the auditor had tested each item in the population.
Statically Sampling allows an auditor to:
- Design an efficient sample
- Measure the sufficiency of the evidential matter obtained ; and
- Evaluate the sample results
Integrated Test Facility:
Uses auditor data and the client’s program.
Parallel Simulation:
Parallel Simulation is a computer-assisted Auditing technique in which an auditor-written or auditor-controlled program is used to process client data.
Hash total:
A hash total is a MEANINGLESS total computed to verify the accuracy and completeness of input.
Assigned department number, when totaled, would provide an example of a hash total.
How transactions of a Batch system are processed?
In a Batch system, transactions are grouped together in batches and then process. So there can be time delayed.
Test Data:
Integrated test facility:
Test Data:
Testing an entity’s controls by using the entity’s system (under the auditor’s supervision) to process a set of transactions containing known errors of interest to the auditor.
Integrated test facility:
creating fictitious component of an entity to process test data along with an entity’s acutual data
Worm:
A computer program that replicates independently by sending itself to other systems.
An alert to restrict the use of auditor’s report is required when:
- The subject matter is based on criteria that are only suitable to a limited numbers of users.
- When the matters are presented in a by-product report that is not the primary objective of the engagement.
True or false:
A paragraph stating that the audit was conducted in accordance with OCBOA while preparing a F/S confirm with an other comprehensive basis of accounting.
False. An audit is never conducted In accordance with OCBOA now. The term OCBOA has been replaced with special purpose framework.
Samples to test internal control structure procedures are intended to provide a basis for an auditor to conclude whether:
The control procedures are operating effectively.
Can an auditor provide suggestions about or draft the F/S based on information from management’s accounting system? If yes, In what situation?
Yes, provided that the company is not SEC regulated.
SEC regulated companies must draft F/S themselves or use an alternative source to draft the F/S.
“Other-matter” paragraph v.s. “Emphasis-of-matter” paragraph
“Other-matter” paragraph:
eg. For “Supplemental information”, no matter- required or not required, omitted or properly presented.
“Emphasis-of-matter” paragraph:
Eg. For “special purpose framework”. Reference the note to the F/S in “Emphasis-of-matter” paragraph
An alert to restrict the use of the auditor’s report is required when?
- The subject matter is based on criteria that are only suitable or available to a limited number of users.
- When the matters are presented in a by-product report that is not the primary objective of the engagement.
Independence violation issue:
A partner in a different office is violated under?
DOL(department of labor) Only.
IFRC, PCAOB, AICPA are all fine with it.
When using classical variables sampling for estimation, an auditor normally evaluates the sampling results by calculating the possible error I either direction. This statically concept is know as
Precision