Planning and Risk Assessment - SU 3 Flashcards
Examples that would indicate possible noncompliance:
Unauthorized/Improperly recorded transactions
Unspecified services to consultants
Unusual cash payments
Failure to file tax returns
Unexplained payments to government officials/employees
If accounts receivable turnover decreases from 1 year to the next, it is possible that
There were fictitious sales in year 2
A large number of bearer bonds on hand indicates
Illegal or suspicious activity: High risk of misstatement due to misappropriation of assets
Analytical procedures used to form an overall conclusion
Reading the financial statements to determine if there are any unusual or unexpected balances not previously detected
Analytical procedures are most appropriate when testing:
Operating expense transactions: are more predictable because it involves INCOME statement accounts
Examples of tests of controls:
Projecting the deviation rate of a statistical sample to the population
Testing purchasing, shipping, and receiving cutoff activities
Risk assessment procedures include:
Inquiries of management and others within the entity
Analytical procedures
Observation and inspection
Substantive procedures include:
Tests of details and analytical procedures designed to detect material misstatements at the ASSERTION LEVEL
Selecting a sample of vendor invoices for comparison with receiving reports is an example of
A test of details
What source would a CPA consult to see how issuers have complied with a new disclosure requirement in a new Accounting Standards Update?
AICPA Accounting Trends & Techniques
The acceptable level of detection risk is inversely related to:
The assurance provided by substantive procedures.
The acceptable level of detection risk is inversely related to the assessed risks of MATERIAL MISSTATEMENT
