Deck 14 Flashcards Preview

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Flashcards in Deck 14 Deck (19):
1

Segregation of duties related to the payroll cycle

Authorization to employ and pay; supervision; timekeeping and cost accounting; payroll check preparation

2

Financing cycle includes:

Entity's debt and equity

3

Biggest concern (assertion) dealing with transactions:

Completeness

4

In evaluating the reasonableness of an estimate, an auditor would normally concentrate on key factors and assumptions that are:

1. Significant to the accounting estimate
2. Sensitive to variations
3. Deviations from historical patterns
4. Subjective and susceptible to misstatements and bias

5

What would assist an auditor in identifying related party transactions?

Reviewing accounting records for nonrecurring transactions recognized near the balance sheet date

6

In evaluating the reasonableness of an estimate, the auditor may perform one or a combination of the following procedures:

Review and test management's procedures, develop an independent estimate for comparative purposes, or review subsequent events and transactions (occurring prior to the completion of fieldwork) for corroborative purposes.

7

Accounting estimate

Subjective number that is being generated by management

8

How do you test fair value measurements and disclosures?

Determine whether management's significant assumptions provide a reasonable basis for fair value measurements

9

The auditor should accumulate misstatements identified during the audit, other than those that are:

"Clearly trivial"

10

"Clearly trivial"

Matters that are not important or significant, both individually and in aggregate, and when judged by any criteria of size, nature, or circumstance

11

Who performs the engagement quality of review?

A partner who is not otherwise associated with the engagement

12

Primary internal control planning objectives of an auditor in a financial statement audit:

- Identify types of potential material misstatements
- Consider factors that affect the risk of material misstatements.
- Design effective substantive tests

13

If the auditor plans to rely on controls that have changed since they were last tested, the auditor should:

Test the operating effectiveness of such controls in the current audit.

14

Gross profit percentage

Gross profit/sales revenue

15

Accounts receivable turnover

Net credit sales/Average accounts receivable

16

Inventory turnover

COGS/Average inventory

17

Common Size financial statements

Used to compare a company's performance with the performance of other smaller or larger companies, or with its own performance over time.

18

Activity ratios

Measures of how effectively an enterprise is using its assets

19

Accounts receivable turnover in days (DSO)

AR/ (sales/365)