Brainscape's Knowledge GenomeTM


Top Flashcards (Certified)
All Flashcards

Audit > Evidence and Risk > Flashcards

Evidence and Risk Flashcards

(57 cards)

Start Studying
1
Q

A majority of the auditor’s work in determining an audit involves the collection of?

A

Evidence

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Evidence consists of?

A
  1. ) client accounting data

2. ) supporting documentation (from clients, 3rd parties)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Evidence has what type of relationship with detection risk?

A

Inverse

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Detection risk is one aspect of audit risk an auditor can control through?

A

Nature, timing, and extent of audit procedures.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

If a high level of detection risk is acceptable then?

A
  • (N) less evidence is collected
  • (T) interim testing acceptable
  • (E) fewer transactions are verified
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

If a low level of detection risk is acceptable then?

A
  • (N) more evidence collected
  • (T) end of year balance testing
  • (E) more transactions are verified
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What are auditors there to verify?

A
  1. ) Assets and revenues are not overstated

2. ) Expenses and Liabilities are not understated

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What is the exception on the CPA exam to what auditors are there to verify?

A

If the CPA exam states that it is a “tax-driven” company then:

  1. ) Assets and revenues are not understated
  2. ) Expenses and liabilities are not overstated
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Auditors want evidence that is?

A
  1. ) Sufficient (Quantity)

2. ) Appropriate (Quality)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

The 2 best types of audit evidence are?

A
  1. ) Observation

2. ) Originates from external parties

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What is the weakest type of audit evidence?

A

Oral evidence from mgmt

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What are substantive procedures? (TRACE)

A 
(T) - Trace
(R) - Reconcile
(A) - Analytical Procedures
(C) - Confirm
(E) - Examine
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Substantive procedures help to reduce?

A

The risk of material misstatement

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Substantive procedures only test the accuracy of?

A

F/S - does not test I/C

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

The assurance level of cash is?

A

High

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

The acceptable DR of cash is?

A

Low

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

If A/R DR is high then what type of confirmation is used?

A

Negative confirmation - customer only responds if balance is materially wrong.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

If A/R DR is low then what type of confirmation is used?

A

Positive confirmation - customer asked to confirm

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

What is the associated I/S account to A/R?

A

Revenue

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

What procedures should be performed for A/P?

A
  1. ) Review P.O.’s/invoices

2. ) Confirm w/vendors

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

What is the associated I/S account to A/P?

A

Expense

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

What procedures should be performed for inventory?

A
  1. ) Examine purchase agreements

2. ) Look at board minutes - is inventory held as collateral

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

What I/S account is associated w/Inventory?

24
Q

What should you do to the beginning balances?

Study These Flashcards
A

Make sure they match last years’ ending balances.

25
What are you checking for with additions and subtractions?
That cash in transactions make it o cash receipts journal and cash out transactions get proper approval
26
What is true of ending balances?
If beginning balances, additions and subtractions are ok then ending balances should be ok
27
What should be performed on the Statement of Cash Flows?
1. ) Foot balances 2. ) Trace cash flow items to other F/S 3. ) Check classifications
28
What are the 3 classifications of a cash flow statement?
Operating activities Investing activities Financing Activities
29
The indirect method must disclose?
1. ) Interest paid 2. ) Income taxes paid 3. ) Non-cash transactions 4. ) Cash and cash equiv. definitions
30
The direct method must disclose?
1. ) Results as if you had used indirect method 2. ) Non-cash transactions 3. ) Non-cash transactions
31
What are subsequent events and post-audit issues?
Notable events that occur after the B/S date and before the audit report is issued.
32
If the audit report has been issued what should the auditor do?
If situation that was present as of the B/S date the client should issue a disclosure to F/S users and/or revise the F/S.
33
What should auditor do if they forgot to perform a substantive procedure?
Determine if other substantive procedures performed served as a substitute. If not audit opinion could be jeopardized.
34
Analytical procedures are required when?
1. ) Planning the audit | 2. ) Reviewing the audit
35
What do analytical procedures help the auditor do?
1. ) Determine if management assertions are reasonable | 2. ) Devlop audit plan & expectations regarding the F/S
36
What do analytical procedures focus on?
On dollar amounts not I/C
37
What type of comparison do analytics perform?
Budget vs. Actual
38
What type of data does analytics use?
Financial (Comparison of data between years) | Non-financial (Use it to predict a F/S number)
39
What are some examples of non financial data used in analytics?
supply usage records comparison year to year such as truck fleet data
40
Analytics are efficient, but they are not...
Effective
41
What do management assertions do?
Help the auditor plan the audit and select substantive tests.
42
What are the management assertions on tests of account balances?
``` Presentation & disclosure Existence Rights & obligations Completeness Valuation & allocation ```
43
What are the management assertions on tests of transactions?
``` Occurrence Cutoff Classification Completeness Accuracy ```
44
What are the management assertions on tests of disclosures?
Occurrence Classification Completeness Accuracy
45
What is not a basic audit procedure?
Testing of direct evidence. Consider the source document. (ex. loan covenant)
46
What is the first and most important thing you need to understand about management estimates?
Understand management's rationale and methods for developing estimates before you can judge reasonableness.
47
What is second thing you must do when considering management estimates?
Formulate their own opinion on what a good estimate should be and compare.
48
What is the final consideration of management estimates?
Do any subsequent events affect the estimate?
49
Working papers are property of the?
Auditor
50
What form can working papers be in?
Paper or electronic
51
Working papers must include what?
Written audit program
52
What is a current file?
Info pertaining to CY audit
53
What is a permanent file?
Info used for this audit and future audits; updated as needed
54
How long must working papers be kept after audit release date?
5 years or longer according to regulations.
55
How long must working papers be kept under PCAOB?
7 years.
56
PCAOB audits also require what additional documentation?
Engagement completion document.
57
How many days after audit report release date can you subtract from the file?
60 days. You can add to the file, but cannot subtract after 60 days. 45 days for PCAOB audits.

Audit (5 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2025 Bold Learning Solutions. Terms and Conditions