Term
1. Client Acceptance and continuance
2. Establish an understanding with the client
3. Preliminary Engagement Activities
4. Plan the Audit |
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Definition
Phases of an Audit That Relate to Audit Planning
1. Client A______ and c_______
2. Establish an __________ with the client
3. Preliminary E_________ Activities
4. Plan the ______ |
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Term
1. Obtain and review financial information.
2. Inquire of third parties.
3. Communicate with the predecessor auditor.
4. Consider unusual business or audit risks.
5. Determine if the firm is independent.
6. Determine if the firm has the necessary skills and knowledge.
7. Determine if acceptance violates any applicable regulatory agency requirements or the Code of Professional Conduct. |
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Definition
Prospective Client Acceptance
1. Obtain and review f_______ information.
2. Inquire of ______ parties.
3. Communicate with the ________ auditor.
4. Consider unusual business or audit ______.
5. Determine if the firm is i__________.
6. Determine if the firm has the necessary s____ and k_______.
7. Determine if acceptance violates any applicable regulatory agency r______ or the _____ of Professional Conduct. |
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Term
1. Evaluate client retention periodically
2. Near audit completion or after a significant event:
a) Conflicts over accounting & auditing issues
b)Dispute over fees |
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Definition
Continuing Client Retention
1. Evaluate client retention
__________
2. Near audit completion or after a significant event:
a) Conflicts over a________ & a_______ issues
b)Dispute over _____ |
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Term
1. The engagement letter;
2. The internal auditors; and
3. The audit committee |
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Definition
Establish Terms of the Engagement
In establishing the terms of the engagement, three topics must be discussed:
1. The e_________ _________;
2. The _________ auditors; and
3. The a_____ __________ |
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Term
| objectives of the engagement, management’s responsibilities, the auditor’s responsibilities, and the limitations of the engagement. |
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Definition
| The terms of the engagement, which are documented in the engagement letter, should include the o________ of the engagement, m_________’s responsibilities, the __________’s responsibilities, and the l__________ of the engagement. |
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Term
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Definition
| The engagement letter f________ the a_________ reached between the auditor and the client. |
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Term
specialists
internal
liability
services
Arrangements |
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Definition
In addition to the items mentioned, the engagement letter may include:
Arrangements for use of s__________ or ________ auditors.
Any limitations of l__________ of the auditor or client.
Additional ________ to be provided.
A___________ regarding other services. |
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Term
Subcommittee
privately held |
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Definition
The Audit Committee
__________ of the board of directors
No specific requirements for __________
________ companies |
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Term
independent
accounting
audit non-audit
complaints
independent counsel
employed |
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Definition
Section 301 of Sarbanes-Oxley Act requires the following for audit committee members of publicly held companies:
Member of board of directors and _______.
Directly responsible for overseeing work of any registered public __________ firm e_______ by the company.
Must pre-approve all a____ and ___-_____ services provided by its auditors.
Must establish procedures to follow for ___________.
Must have authority to engage ______ _________ |
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Term
resources
detailed
effective
efficient |
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Definition
Planning the Audit
The auditor will develop an overall audit strategy for conducting the audit. This will help the auditor to determine what __________ are needed to perform the engagement.
An audit plan is more _______ than the audit strategy.
Basically, the audit plan should consider how to conduct the engagement in an _________ and ___________ manner. |
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Term
risk assessment
understanding |
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Definition
Planning the Audit
When preparing the audit plan, the auditor should be guided by the ____ _________results of the procedures performed to gain an of the entity. |
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Term
risks materiality
specialists
illegal acts
related
analytical
value-added
Strategy Plan Audit |
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Definition
Planning the Audit Additional steps:
Assess business ____ and establish m_________.
Assess the need for s________.
Assess the possibility of_____ _______ .
Identify ________ parties.
Conduct preliminary __________ procedures.
Consider additional v_____-_____ services.
Document Audit s_____ and P___ and Prepare A____ Programs. |
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Term
1.audit risk
a)account balance
b) audit risk |
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Definition
Assess Risks and Establish Materiality
1. Use ____ _____ model
a) Restrict risk at a____ _________level
b) Achieve acceptable level of _____ ____ |
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Term
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Definition
Specialists
The use of an __ __________ is a significant aspect of most audit engagements |
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Term
1. Direct
Material
audit
2. Indirect
Material
aware
investigate |
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Definition
Illegal Acts
1. _______ & M________, Consider laws & regulations as part of _____.
2. _______ and , Be _______ may have occurred; i___________ if brought to attention. |
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Term
Affiliates
equity
employees
Principal
Management
Immediate families
significant influence |
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Definition
Related Parties examples
A________ of the enterprise.
Entities using e____ method to account for investments.
Trusts for benefit of e________.
P_______ owners of enterprise.
M_________.
I______ ______of the principal owners & management.
Other parties that can have ________ i________. |
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Term
minutes
conflict-of-interest
customers
suppliers
borrowers
lenders
large
unusual
nonrecurring
year end
loan agreements |
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Definition
How to Identify Related Parties
Review board m______.
Review c_____ __ ______ statements.
Review transactions with major c_______, s______, b_______, and l______.
Review l____, u_____, or nonr_______ transactions especially at _____ _____.
Review l___ ________ for guarantees. |
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Term
business
transactions
errors |
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Definition
Preliminary Analytical Procedures Purpose:
To understand the client’s b_______ and t_________.
To identify financial statement accounts likely to contain _______. |
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Term
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Definition
Preliminary Analytical Procedures
By understanding the client’s business and identifying where errors are l_______ __ _______ , the auditor can allocate more ___________ to investigate necessary accounts. |
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Term
1. Risk Assessment
2. Controls
3. Substantive |
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Definition
Types of Audit Tests
1. R____ _________ Procedures
2. Tests of ________
3. S__________ Procedures |
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Term
| Risk Assessment Procedures |
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Definition
| Used to obtain an understanding of the entity and its environment, including its internal control |
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Term
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Definition
| Directed toward the evaluation of the effectiveness of the design and operation of internal controls |
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Term
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Definition
| Detect material misstatements in a transaction class, account balance, and disclosure component of the financial statements |
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Term
Walk Through
Inquiry
Reperformance
Inspection
Observation |
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Definition
Tests of Controls
W_______
I_______
R_______
I_______
O_______ |
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Term
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Definition
Substantive Procedures
1. Tests of ________
2. __________ Procedures |
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Term
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Definition
| Tests for errors or fraud in individual transactions, account balances, and disclosures. |
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Term
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Definition
| Obtains evidential matter about particular assertions related to account balances or classes of transactions |
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Term
Tests of Controls
Substantive |
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Definition
Dual Purpose Tests
Serve as:
_____ __ ______ AND S_____ ____ |
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Term
Preliminary
Substantive
Final |
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Definition
Analytical Procedures
1. _________ Analytical Procedures
2. _________ Analytical Procedures
3. _________ Analytical Procedures |
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Term
| Substantive Analytical Procedures |
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Definition
| Used to obtain evidential matter about particular assertions related to account balances or classes of transactions |
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Term
| Final Analytical Procedures |
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Definition
| Used as an overall review of the financial information in the final review stage of the audit. |
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Term
| Preliminary Analytical Procedures |
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Definition
| Used to assist the auditor to better understand the business and to plan the nature, timing, and extent of audit procedures. |
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Term
1. Trend
2. Ratio Analysis
3. Reasonableness Analysis |
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Definition
Types of Analytical Procedures
1. T____ Analysis
2. R____ Analysis
3. R_________ Analysis |
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Term
Financial and operating
Budgets and forecasts
Industry
Competitor
Management’s
Analyst’s |
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Definition
Develop an Expectation
Auditing standards require the auditor to have an expectation whenever analytical procedures are used. An expectation can be developed using a variety of information sources such as:
F________ and o________ data.
B_____ and f_________.
I_________ publications.
C_________ information.
M__________ analyses.
A________ reports. |
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Term
significance
reliance
disaggregation
precision
planning |
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Definition
Define a Tolerable Difference
The size of the tolerable difference depends on:
-the s________ of the account;
-the desired degree of r________ on the substantive analytical procedures;
-the level of dis_________ in the amount being tested; and
-the p________ of the expectation.
But the amount is always less than _________ materiality! |
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Term
expectation
tolerable difference |
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Definition
Compare and Investigate
Compare the e________ to the recorded amount and investigate any differences greater than the _______ _________. |
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Term
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Definition
Investigate Differences for Planning and Final Analytical Procedures:
1.Preliminary Analytical Procedures Differences-Corroborating evidence
_____ required.
2. Final Analytical Procedures Differences-Corroborating evidence
____ required
2. |
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