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Audit > QUIZ 1 > Flashcards

QUIZ 1 Flashcards

1
Q

What is relevance

A

information that is useful in the audit of a company

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2
Q

what is reliability

A

Information that will not confuse investors

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3
Q

What is assertion

A

claim business owners make that states financial information is accurate

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4
Q

What is an example of an agent

A

Managers

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5
Q

What is an example of principals

A

Stockholders

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6
Q

Information Asymmetry

A

imbalance between two negotiating parties in their knowledge of relevant details (Agents vs principals.)

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7
Q

Factors affecting demand for information

A

Complexity, information in a timely manner, information for remote people, reliability

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8
Q

Occurence

A

transactions and events have been recorded or disclosed have occured

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9
Q

Completeness (transactions)

A

transactions and events that should have been recorded have been recorded

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10
Q

Authorization

A

All transactions have been properly authorized

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11
Q

Accuracy

A

amounts an other data relating to recorded transactions and events have been recorded appropriately

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12
Q

Cutoff

A

transactions and events have been recorded in correct accounting period

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13
Q

classification

A

transactions and events have been recorded in proper accounts

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14
Q

presentation

A

transactions and events are appropriately aggregated or disaggregated and clearly described

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15
Q

Existence

A

Assets, liabilities, and equity acutally exists

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16
Q

Rights and Obligations

A

the entity holds or controls the rights to assets, and liabilities are obligations of entity

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17
Q

completeness (Accounts)

A

all assets, liabilities, and equity interests that should have been recorded are recorded

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18
Q

Valuation and allocation

A

assets, liabilities, and equity interests are included in the financial statements at the appropriate amounts

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19
Q

Accuracy, valuation, allocation

A

assets, liabilities, and equity have been included in financial statements in proper amounts

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20
Q

Classification

A

Assets, liabilities, and equity have been recorded in proper accounts

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21
Q

Presentation

A

Assets, liabilities, and equity interests are appropriately aggregated and disaggregated and clearly described

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22
Q

Auditing

A

systematic process of objectively obtaining and evaluating evidence regarding assertion, about economic actions and events to ascertain the degrees of correspondence between assertions and established criteria and communicating results to users

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23
Q

Materiality

A

magnitude of an omission or misstatement of information that makes a potential investor change there mind

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24
Q

Audit Risk

A

Risk the auditor expresses, an inappropriate audit opinion when the financial statements are materially misstated

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25
Q

Reasonable Assurance

A

implies some risk that a material misstatement could be present in the financial statements and the competent auditor will fail to detect it

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26
Q

Audit evidence

A

consists of underlying accounting information or external information to the auditor

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27
Q

Sufficient

A

Quantity of evidence

28
Q

Appropriateness

A

is evidence relevant and reliable

29
Q

Unqualified Opinion

A

Statements are free from material misstatements, so auditor does not need to qualify his opinion on company

30
Q

Qualified

A

Statements presented are fair EXCEPT for the misstatement found

31
Q

Adverse

A

statements are not presented fairly and should not be relied upon

32
Q

Disclaimer

A

not possible to express an opinion on the fairness of financial statements

33
Q

Four sections of CPA

A

auditing and attestation, business environment and concepts, financial accounting and reporting, regulation

34
Q

1887

A

AICPA is established

35
Q

Revenue Acts (1913/1918)

A

increased importance of accounting

36
Q

1932

A

Kreuger and Toll ponzi scheme exposed

37
Q

1933/1934

A

SEC established, audits are required

38
Q

1990’s-2000’s

A

Huge frauds (WorldCom, Enron), Arthur Anderson collapses, confidence in auditing is ruined

39
Q

SOX

A

Regulation of audit profession, PCAOB created

40
Q

SOX Implications

A

CEO/CFO certification of, statements, audit of internal controls, PCAOB, prohibition of certain not audit services

41
Q

Who is responsible for internal controls and fairness of financial statements

A

Management

42
Q

Corporate Governance

A

Board of directors mostly, then subgroup of audit committee

43
Q

Five Business Components

A

Revenue process, financing process, purchasing process, human resources, inventory

44
Q

ASB

A

Accounting standards board- nonpublic company audits

45
Q

PCAOB

A

public company accounting oversight board- public company audits

46
Q

ASB’s auditing standards

A

Purpose, responsibilities, performance, reporting

47
Q

Ethics

A

system or code of conducts based on moral duties and obligations that indicate how we should behave

48
Q

professionalism

A

conduct, aims, or qualities that characterize a profession or professional person

49
Q

Utilitarian approach

A

decision making involves trade offs between the benefits and burdens of alternative actions and focuses on consequences and on individuals affected

50
Q

Rights Based Approach

A

requires recognition that individuals have certain rights and other individuals have a duty to respect those rights when making decisions

51
Q

Justice based approach

A

is concern with issues such as equity, fairness, and impartiality

52
Q

Responsibilities

A

exercise sensitive professional and moral judgements in all activities

53
Q

Public Interest

A

accept the obligation to act in a way that will serve the public interest, honor the public interest

54
Q

integrity

A

maintain and broaden public confidence, members should perform all professional responsibilities with the highest sense of integrity

55
Q

objectivity and independence

A

maintain objectivity and be free of conflicts in discharging professional responsibilities

56
Q

Due care

A

member should observe the profession’s technical and ethical standard and continue to improve

57
Q

scope and nature of services

A

should observe the principles of the code of conduct in determine scope and nature of services provided

58
Q

Covered members

A

individual on the attest engagement team, position to influence the attest engagement, partner or equivalent or manager who provides more than 10 hours non-attest service’s to client, partner or equivalent in the office in which lead attest engagement practices, firm including firms employee benefit plan, entity whos’ operating, financial, or accounting policies can be controlled by any individuals entities if they act together

59
Q

Prohibited Financial Relationships

A

Direct and material indirect

60
Q

direct

A

financial interest that is owned directly by an individual or entity or is under the control of an individual or entity

61
Q

material indirect

A

may result when a covered member has a associate financial interest in an entity associated with an attest entity.

62
Q

Prohibited business relationships

A

CPA performs a managerial or other significant role for an entity’s organization. CPA leaves firm and is employed by firm in key position

63
Q

Family Rules

A

Spouse is covered, children is covered (immediate family is CPA). Other family members impair if have financial interest and CPA knows or has close relationship

64
Q

Litigation

A

Instantly indicates impaired indipendence

65
Q

Four basic principles of objectivity

A

auditor should not audit own work, auditor should not function as management, auditor should not advocate, should not have mutual or conflicting interest

66
Q

General standards rule

A

professional competence, due professional care, planning, sufficient relevant data

67
Q
A

Audit (4 decks)

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