Shared Flashcard Set

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C240 Auditing
Auditing
168
Accounting
Undergraduate 4
04/04/2017

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Cards

Term
Becasue engagement risk is a significant factor, audit firms use a _________ to selectively choose which clients to engage with.
Definition
systematic process
Term
AS 7 applies to all audits of public companies and, thus, requires engagement quality control reviews to be conducted on…
Definition
every audit of public companies.
Term
Both __________________ standards require that audit firms establish formal systems of quality control to ensure an acceptable level of audit quality.
Definition
AICPA and PCAOB
Term
What term refers to the risk of loss associated with accepting an audit engagement?
Definition
Engagement risk refers to the risk of loss (e.g., litigation exposure, reputation impairment) associated with the acceptance of an audit engagement.
Term
The AICPA requires a peer review every…..
Definition
three years.
Term
Which auditing firms are subject to annual PCAOB inspections?
Definition
Auditing firms registered with the PCAOB and audit 100 or more public issuers are subject to annual inspections.
Term
The ______________ is one who has no engagement responsibilities with the client other than to review the work performed by the engagement team.
Definition
engagement partner
Term
A predecessor auditor requires _________ from the client's management prior to responding to inquiries from the incoming auditor regarding the predecessor auditor's experiences in auditing the client.
Definition
permission
Term
Which document contains general overview of the agreement between the client and the auditor, including the scope of the engagement, expectations of management and the auditor, and the general nature of work to be performed and deliverable to be produced?
Definition
The engagement letter contains a general overview of the agreement between the client and the auditor, and it establishes expectations of both parties in an engagement.
Term
As illustrated in the HealthSouth fraud case, audit failures frequently lead to ________________ that are far greater than audit fees received.
Definition
litigation and reputation losses
Term
The ______ strategically selects audit engagements that are most likely to contain deficiences when performing its annual inspections.
Definition
PCAOB
Term
Audit firms are given _________ to rectify and address specific issues identified in the public portions of PCAOB inspections.  If the firm does not remedy the defects within the __________, the private portion of the report is made public by the PCAOB.
Definition
12 months & 12 months
Term
The engagement quality control review should be completed _______ to the release of the auditor report.
Definition
prior
Term
Contacting the predecessor auditor is required under _____. However, the current (successor) auditor should obtain management's permission before contacting the prior auditor.
Definition
GAAS
Term
Prior to accepting an audit client, the auditor is required to determine whether the _______________have been prepared according to an acceptable framework.
Definition
financial statements
Term
When establishing an understanding with an audit client, that understanding should be documented
Definition
Through a written communication with the client-because the professional standards state that the communication should be in writing.
Term
What actions should a CPA firm take to comply with the AICPA's quality control standards?
Definition
Establish policies to ensure that the audit work meets applicable professional standards.
Term
What is the responsibility of a successor auditor with respect to communicating with the predecessor auditor in connection with a prospective new audit client?
Definition
The successor auditor should obtain permission from the prospective client to contact the predecessor auditor.
Term
Within the context of quality control, a primary purpose of the engagement performance element is to help ensure that
Definition
Engagements are adequately supervised.
Term
What factor most likely would lead a CPA to conclude that a potential audit engagement should not be accepted?
Definition
It is unlikely that sufficient appropriate evidence is available to support an opinion on the financial statements.
Term
What are the key areas the auditor should seek to obtain an understanding of the audit client?
Definition
The client's operations, The entity's financing and the entity's objectives and strategies
Term
Having an ____________________ helps the auditor both assess the risk of material misstatement and evaluate identified misstatements.
Definition
understanding of the entity and its environment
Term
Materiality refers to
Definition
the the amount that could reasonably be expected to influence the economic decisions of users made on the basis of the financial statement.
Term
Audit Risk is the
Definition
likelihood that the auditor will provide an unqualified (i.e., clean) audit opinion on a set of financial statements that are, in fact, materially misstated.
Term
Understanding the ______________ helps the auditor to better assess the risk of material misstatements in the financial statements and to better evaluate misstatements discovered during the audit.
Definition
entity and its environment
Term
The auditor generally selects a ______________ that is relevant to financial statement users.
Definition
materiality benchmark
Term
The auditor has a responsibility to perform audit procedures (e.g., contact predecessor auditor) to obtain assurance regarding the beginning balances, but the auditor does not have to perform a ___________ of the prior year's financial statements.
Definition
full audit
Term
What are 3 qualitative factors that the auditor should consider when determining overall planning materiality?
Definition
1. Specific debt covenant requirements, 2. Managments ability to meet earnings expectations and 3. The company's ability to maintain earnings growth
Term
What account is generally NOT considered a part of the expenditure cycle?
Definition
Sales -NOT (Cash, COGS, and AP are considered to be part of the expenditure cycle)
Term
Materiality is determined by both __________ of the misstatement.
Definition
the size and nature
Term
Audits are designed to identify __________ misstatements
Definition
material
Term
When auditors are determining the dollar amount that would be considered material to the financial statements, they consider financial statement _______________ rather than determining what amounts would be material to each individual financial statement user
Definition
users in general (i.e., as a group)
Term
Which management assertions is the auditor most likely to be concerned about with respect to a client's liability accounts?
Definition
Completeness - auditors are generally most concerned that management has completely recorded all of its liabilities on the financial statements (i.e., completeness assertion).
Term
The _________ is an activity in the revenue cycle.
Definition
sale of goods
Term
Prior to commencing fieldwork, an auditor usually discusses the general audit strategy with the client’s management. What matters do the auditor and management agree upon at this time?
Definition
The coordination of the assistance of the client’s personnel in data preparation.
Term
Prior to commencing fieldwork, an auditor usually discusses the general audit strategy with the client’s management.  What details do management and the auditor usually agree upon at this time?
Definition
The schedules and analyses that the client’s staff should prepare.
Term
Management’s emphasis on meeting projected profit goals most likely would significantly influence an entity’s control environment when
Definition
A significant portion of management compensation is represented by stock options.
Term
Following the Professional Standards what are 3 of the assertions made by management for account balances?
Definition
Completeness, Existence and Valuation and Allociation
Term
The element of the audit planning process most likely to be agreed upon with the client before implementation of the audit strategy is the determination of the
Definition
Timing of inventory observation procedures to be performed.
Term
A senior-level manager insists that the accounting manager over accounts receivables adjust the estimate for allowance for doubtful accounts to be more liberal (i.e., fewer people will default on their receivables).  The senior-level manager knows that the revised estimates are inaccurate, but he insists on the change because it will increase the company's net income for the quarter to a point where he will receive a bonus.  This scenario describes an example of:
Definition
Financial statement fraud
Term
Efficiency and effectiveness of the audit are typically at _____________.
Definition
odds with one another. Effectiveness requires high levels of resources of time and effort while efficiency involves reducing the amount of resources devoted to the audit.
Term
Auditing standards require that ______ key members of an audit team participate in the brainstorming session.
Definition
ALL - Auditing standards require that all key members of an audit team participate in the brainstorming session. Key personnel is generally interpreted as meaning most members of the engagement team (e.g., the partner in charge, senior manager, manager, seniors, etc.).
Term
The primary distinction between a material error and a material fraud is the …
Definition
intent of the party that created the misstatement.
Term
_____________ of whether the error is due to error or fraud, the auditor is responsible for obtaining reasonable assurance regarding the fair presentation of the financial statements
Definition
Regardless
Term
___________ is defined as the risk that the auditor issues an unqualified opinion (i.e., clean opinion) on a set of financial statements that are, in fact, materially misstated.
Definition
Audit Risk
Term
Audit Risk formula
Definition
AR = IR * CR * DR
Term
___________________ - refers to the auditor providing a clean or unqualified opinion on the financial statements when in fact a material misstatement exists.
Definition
A Type II error and Audit Risk share the same definition.
Term
Auditors are responsible for obtaining reasonable assurance that the financial statements are free of material misstatements caused by ___________.
Definition
error or fraud
Term
As reported in the COSO 2010 fraud study cited in this topic, _______________ are more likely to have increased fraud risks.
Definition
smaller companies
Term
Of the three main categories of occupational fraud, which has the distinction of being (1) the least common and (2) the most costly?
Definition
Fraudulent financial reporting
Term
Audit procedures performed near year end are generally considered __________ than procedures performed at interim periods.
Definition
more reliable
Term
Use the audit risk model to calculate audit risk (to the closest percent) in the following circumstance: CR 40%. IR 40% and DR 40%
Definition
6% .40x.40x.40=6.4%
Term
In a financial statement audit, inherent risk is evaluated to help an auditor assess….
Definition
The susceptibility of a financial statement assertion to a material misstatement assuming there are no related controls.
Term
What best describes the auditor’s responsibility regarding the detection of material errors and fraud?
Definition
Auditing procedures may or may not need to be extended if the auditor’s analysis indicates the existence of fraud risk factors.
Term
Inherent risk and control risk differ from detection risk in that inherent risk and control risk are
Definition
Functions of the client and its environment while detection risk is not.
Term
In which circumstance is the confirmation of receivables on October 31 most likely for a client with a December 31 year-end?
Definition
Appropriate audit tests indicate that control risk for receivables is low
Term
Attest services __________ issuing a report regarding the subject matter examined.
Definition
Do involve
Term
A common cause for _______ misstatements is pressure to meet analyst expectations.
Definition
intentional
Term
_______ services do include prospective (forward-looking) information.
Definition
Attest
Term
The American Institute of Certified Public Accountants (AICPA) defines "objectivity" as a state of mind, a quality that imposes all of the following obligations
Definition
Intellectual honesty
Free of conflicts of interest
Impartiality
Term
Audit partners in the U.S. can serve a particular client for no more than __ years consecutively.
Definition
Audit partners are limited to serving a particular client for 5 years consecutively.
Term
An _________ audit opinion is a positive opinion regarding the financial statements indicating that the auditor believes the financial statements are fairly stated without qualification.
Definition
unqualified (unmodified)
Term
When auditing financial statements, auditors seek to identify all _______ misstatements in the financial statements.
Definition
material

auditors seek to identify only material misstatements. While they may identify misstatements that are not material in nature, they do not design their audit procedures to identify non-material misstatements.
Term
Auditors are required to continue to learn throughout their careers with a certain number of hours of continuing professional education in order to maintain their _______ and to continue to provide high quality audits.
Definition
CPA license
Term
SysTrust and WebTrust are types of __________ aimed at improving the quality of information relating to IT systems and websites.
Definition
assurance services
Term
High audit quality improves both the quality of the financial statements as well as the __________ from users.
Definition
level of trust
Term
Sellers of high quality vehicles ____________ their vehicles at prices below what their vehicle is worth, so they remove them from the market. The average quality of the vehicles continues to drop until only low quality vehicles remain.
Definition
refuse to sell
Term
Auditors seek to provide reasonable assurance, not ________ assurance.
Definition
absolute
Term
The term '__________' refers to implicit or explicit claims made by management in the preparation of the financial statements.
Definition
assertion
Term
Knowing that the auditor will be evaluating the financial statements will cause management to be more careful in preparing them, reducing the likelihood of both _______________ misstatements. In addition, auditors frequently find material misstatements in the course of the audit which can then be corrected by management.
Definition
intentional and unintentional
Term
all items would most likely result in unintentional not intentional misstatements.
Definition
Weak internal controls
Human judgment errors
Unqualified client staff
Term
Generally Accepted Auditing Standards (AU 150)-GENERAL
Definition
1. Technical training and proficiency
2. Independence
3. Due professional care
Term
Generally Accepted Auditing Standards (AU 150)-FIELD WORK
Definition
4. Adequate planning and supervision
5. Sufficient understanding of internal control
6. Sufficient appropriate evidential matter
Term
Generally Accepted Auditing Standards (AU 150)-REPORTING
Definition
7. Conformity with GAAP
8. Consistency in application of accounting principles
9. Adequate disclosures
10. Express an opinion
Term
The _____ issues auditing standards for audits of public companies in the U.S..
Definition
PCAOB
Term
Requirements for physical inventory count is in response to the
Definition
McKesson & Robbins fraud
Term
The ___ has congressional authority
Definition
SEC
Term
The _____________ requires that the SEC ensure that rigorous auditing standards are set and adhered to.
Definition
Securities Exchange Act of 1934
Term
Obtaining an understanding of the clients internal controls is one of the _______.
Definition
10 (GAAS) Generally Accepted Auditing Standards
Term
The standards of independence, proficiency and training, and due professional care are included in the ___________ category
Definition
general standard
Term
ISA auditing standards are issued by the ______.
Definition
IAASB
Term
The fact that Mr. Musica knew what the auditors would do during the course of the audit is one of the reasons the _____________ was able to be carried out for so long.
Definition
McKesson & Robbins fraud
Term
The ____ issues auditing standards for audits of nonpublic companies in the U.S
Definition
ASB
Term
The Auditing Standards Board of the ______ issues SAS auditing standards.
Definition
AICPA
Term
The __________ have been working to converge standards.
Definition
ASB and IAASB
Term
The McKesson & Robbins fraud led to the addition of the requirement to send confirmations for ____________ as well as the requirement to observe the ______________.
Definition
Accounts Receivables

physical count of inventory
Term
Independence in mental attitude is one of the 10 GAAS that falls under the ___________ category.
Definition
general standards
Term
The PCAOB's 10 GAAS are broken into the following three categories:
Definition
Fieldowork, General, and Reporting Standards
Term
The __________ have been working to converge standards. The PCAOB has not worked to converge standards with either of the other two standard-setting bodies.
Definition
ASB and IAASB
Term
Statements on Auditing Standards are enforceable under the
Definition
AICPA Code of Professional Conduct.
Term
Statements on Standards for Accounting and Review Services are enforceable under the
Definition
AICPA Code of Professional Conduct.
Term
Statements on Standards for Valuation Services are enforceable under the
Definition
AICPA Code of Professional Conduct.
Term
What AICPA standard did the PCAOB not adopt as a part of its interim standards?
Definition
the PCAOB did not adopt the AICPA’s Accounting and Review Services Standards because they only apply to nonpublic companies ("non-issuers").
Term
What underlies the application of generally accepted auditing standards, particularly the standards of fieldwork and reporting?
Definition
the elements of materiality and audit risk underlie the application of all the standards, particularly the standards of fieldwork and reporting.
Term
Auditors involved in governmental auditing should
Definition
use the US Governmental Accountability Office creates audit standards to be used in governmental auditing. All relevant standards of the AICPA for financial related audits have been incorporated by reference as part of the generally accepted auditing standards.
Term
The Public Company Accounting Oversight Board (PCAOB) has authority to establish _______ relating to public companies?
Definition
PCAOB may establish attestation standards, independence standards, auditing standards, and quality control standards.
Term
The Department of Labor (DOL) most frequently conducts financial and performance audits following
Definition
the DOL conducts most of its financial and performance audits following Government Auditing Standards, including audits of compliance with laws, evaluation of economy and efficiency of operations, and evaluation of effectiveness in achieving program results.
Term
International Standards on Auditing are issued by
Definition
International Auditing and Assurance Standards Board of the International Federation of Accountants.
Term
10-Ks
Definition
annual reports
Term
10-Qs
Definition
quarterly reports
Term
8-Ks
Definition
informing investors of significant events
Term
DEF-14As
Definition
annual meeting and shareholder voting information
Term
The Sarbanes-Oxley Act of 2002 was passed by Congress in response to several high-profile financial statement frauds. This law – commonly referred to as SOX – established the
Definition
PCAOB

and granted it the authority to serve as the standard setter for audits of SEC registrants
Term
A negligence law suit brought under which of the laws results in the burden of proof being shifted more heavily to the auditor?
Definition
The Securities Act of 1933 results in the highest standard of care for auditors due to the fact that investors are more heavily reliant on audited financial statements of companies issuing initial filings than they are for companies that have a long record of audited financial statements.
Term
Which of the laws requires audits of financial statements that are filed with the SEC for the initial sale of securities?
Definition
The Securities Act of 1933 requires audits of the financial statements filed with the SEC for initial sale of securities.
Term
AICPA developed the Code of Professional Conduct-6 principles
Definition
1. Responsibilities
2. The Public Interest
3. Integrity
4. Objectivity and Independence
5. Due Care
6. Scope and Nature of Services
Term
Responsibilities:
Definition
In carrying out their responsibilities as professionals, members should exercise sensitive professional and moral judgments in all their activities.
Term
The Public Interest:
Definition
Members should accept the obligation to act in a way that will serve the public interest, honor the public trust, and demonstrate commitment to professionalism.
Term
Integrity
Definition
To maintain and broaden public confidence, members should perform all professional responsibilities with the highest sense of integrity.
Term
Objectivity and Independence
Definition
A member should maintain objectivity and be free of conflicts of interest in discharging professional responsibilities. A member in public practice should be independent in fact and appearance when providing auditing and other attestation services.
Term
Due Care
Definition
A member should observe the profession's technical and ethical standards, strive continually to improve competence and the quality of services, and discharge professional responsibility to the best of the member's ability
Term
Scope and Nature of Services
Definition
A member in public practice should observe the Principles of the Code of Professional Conduct in determining the scope and nature of services to be provided.
Term
In addition to these six principles of professional conduct, the Code of Professional Conduct includes guidelines and rules with specific applications. These rules are divided into what catagories
Definition
Section 100: Independence, Integrity and Objectivity
Section 200: General Standards Accounting Principles
Section 300: Responsibilities to Clients
Section 400: Responsibilities to Colleagues
Section 500: Other Responsibilities and Practices
Term
The demonstration of a commitment to excellence is part of the _________ principle of professional conduct.
Definition
Public Interest
Term
Auditors need to be independent in _________ as well as independent in _____ when conducting the audit.
Definition
appearance & fact
Term
10-Ks
Definition
annual reports
Term
10-Qs
Definition
quarterly reports
Term
8-Ks
Definition
informing investors of significant events
Term
DEF-14As
Definition
annual meeting and shareholder voting information
Term
The Sarbanes-Oxley Act of 2002 was passed by Congress in response to several high-profile financial statement frauds. This law – commonly referred to as SOX – established the
Definition
PCAOB

and granted it the authority to serve as the standard setter for audits of SEC registrants
Term
Auditors are prohibited from receiving contingent fees which are defined as fees that are dependent _______________.
Definition
on the outcome of the audit.
Term
List examples that represents an act discreditable which is prohibited under the code of professional conduct?
Definition
A CPA fails to file a tax return or pay a tax liability
A CPA fails to follow the expectations outlined in the code of professional conduct
An auditor fails to follow auditing standards developed by the AICPA
Term
The auditor may need to violate _______________ in order to comply with a valid subpoena or when laws or regulations require the disclosure of client information.
Definition
the client confidentiality rule
Term
What rule is being violated when:
An auditor is proud of the fact that they have a reputation of providing unqualified audit opinions to their clients and uses this fact to solicit new clients. Is this a violation of the code of professional conduct?
Definition
This is a violation of the code of professional conduct's prohibition against false, misleading, or deceptive advertising. Specifically, this form of advertising creates false or unjustified expectations for favorable results in the audit.
Term
The PCAOB suggested that one way to improve the application of professional skepticism is to set the proper tone at the ____ of the audit firm organization
Definition
top
Term
Covered members are ______________ that are required to comply with the AICPA's independence rules. Note also, that covered members' immediate family members must also comply with AICPA independence rules.
Definition
individuals or entities
Term
The Securities Act of ______ requires audits of the financial statements filed with the SEC for initial sale of securities.
Definition
1933
Term
Auditors are _____________ to evaluate their client's compliance with all laws and regulations. However, if they determine that a client has not complied with a law or regulation, they should determine if and how the noncompliance impacts the financial statements. In some cases, the auditor has a responsibility to report illegal acts to others outside of the client organization.
Definition
not responsible
Term
The Securities Exchange Act of ____ requires public companies to file these periodic reports with the SEC.
Definition
1934, 10-Ks, 10-Qs, and 8-Ks
Term
When an accountant is not independent, the accountant is precluded from issuing a:
Definition
Review report

a review is an attest engagement that results in limited assurance; accordingly, independence is required.
Term
In which situation would a CPA firm be independent with respect to an audit client?
Definition
A professional employee assigned to the engagement has a spouse that is employed as a salesperson by the client.

A covered member’s spouse may be employed by an attest client providing that he or she is not employed in a key position.
Term
A CPA who is not in public practice is obligated to follow which of the rules of conduct?
Definition
Integrity and objectivity.
Term
A CPA firm must ____________ before it can participate in the preparation of an audit report of a company registered with the Securities and Exchange Commission (SEC)?
Definition
Register with the Public Company Accounting Oversight Board-

because the Sarbanes-Oxley Act requires CPA firms that audit companies that are registered with the Securities and Exchange Commission be registered with the Public Company Accounting Oversight Board.
Term
When reporting on both the audit of financial statements and the audit of internal control, the auditor can...
Definition
do one or two reports
Term
__________, not the auditor, has primary responsibility for the proper functioning of a company's system of internal control.
Definition
Management
Term
Monitoring includes both ______________ monitoring activities.
Definition
separate and ongoing
Term
If the auditor believes the client's internal controls are effective, she should issue which type of audit opinion?
Definition
The auditor should issue an unqualified opinion on internal controls if she believes the controls are effective.
Term
The auditor has to obtain an _________ of their client's controls, regardless of whether or not she is performing an internal control audit or an audit of financial statements only.
Definition
understanding
Term
The five components of the COSO framework are:
Definition
Control Environment, Risk Assessment, Control Activities, Information & Communication, and Monitoring.
Term
The _____ auditor is required by the Sarbanes-Oxley Act of 2002 to conduct both the audit of internal control and the audit of the client's financial statements. Thus, this approach is called an integrated audit.
Definition
same
Term
The auditors opinions can be either ________________.
Definition
unqualified or adverse

No other audit opinions - including qualified - are available for the report on the audit of internal control.
Term
Using a pure __________ approach means that the auditor is not going to rely on controls for any evidence. Therefore, the auditor would not spend significant resources to test controls.
Definition
substantive
Term
If the auditor chooses to rely on internal controls for audit evidence, he or she would need to thoroughly __________.
Definition
test the controls
Term
Auditors are primarily concerned with the __________ of internal control.
Definition
reporting objective
Term
COSO was originally founded by five organizations: _________________
Definition
AICPA, AAA, FEI, IMA, IIA.
Term
Auditing standards only require that the auditor publicly disclose the presence of __________ in the auditor's report to the public.
Definition
material weaknesses
Term
A client erroneously recorded a large purchase twice. what would be most likely to detect this error in a timely and efficient manner?
Definition
reconciling the vendors’ monthly statements with the subsidiary ledger for payables should disclose a difference in the month following the error.
Term
Three parts of the required content of management’s report on internal control under the standards of the Public Company Accounting Oversight Board?
Definition
-The criteria used for assessment.
-Management’s acknowledgement of responsibility for internal control
-Management’s assessment of internal control.
Term
What audit techniques ordinarily would provide an auditor with the least assurance about the operating effectiveness of an internal control activity?
Definition
Preparation of system flowcharts.

while auditors may use system flowcharts to document internal control and find weaknesses in the design of internal control, such flowcharts do not reveal whether the controls are operating effectively.
Term
During the audit the independent auditor identified the existence of a significant deficiency in the client’s internal control and communicated this finding in writing to the client’s management and to those charged with governance. The auditor should
Definition
Document the matter in the working papers and consider the effects of the condition on the audit.
Term
What is a step in an auditor’s decision to assess the risk of material misstatement at a low level by relying on controls?
Definition
Identify specific controls that are likely to detect or prevent material misstatements.

assessing the risk of material misstatement below the maximum based on controls involves (1) identifying specific controls relevant to specific assertions, and (2) performing tests of controls to evaluate their effectiveness.
Term
The auditor is required to document _________________ This is the same thing as the materiality threshold.
Definition
"the amount below which misstatements would be regarded as immaterial."
Term
As the level of acceptable sampling risk _____________, the required sample size will decrease.
Definition
increases
Term
__________ the sample size reduces sampling risk, but it does not have an effect on non-sampling risk
Definition
Increasing
Term
The term "__________" refers to the individual items to be sampled and tested from a population
Definition
sampling unit
Term
the auditor is required to consider the likelihood that an observed deviation/misstatement is caused by
Definition
error or fraud.
Term
Examples of a cause of non-sampling risk?
Definition
-The auditor uses an inappropriate audit procedure to test an assertion
-The auditor uses a correct audit procedure, but implements the procedure incorrectly
-The auditor misinterprets audit evidence obtained from a properly-performed audit procedure
Term
An auditor selects all invoices during the month of December (the final month of the client's fiscal year) for testing. This is an example of ___________
Definition
block unit sampling.
Term
Non-statistical sampling techniques do not require _____________
Definition
random selection
Term
Compute the estimated population deviation rate for the following scenario:

The auditor tests a sample of 73 instances of a control functioning out of a population of 5,300. She finds that the control failed to function properly in 6 cases.
Definition
8.2%
The estimated population deviation rate is equal to the sample deviation rate which is computed as 6/73=.082 (8.2%).
Term
Auditors must document ___________ discovered during the audit, whether they were corrected by management or not.
Definition
all misstatements
Term
Professional auditing guidance suggests that auditors define a misstatement ____________
Definition
in their work papers.
Term
The __________ to be used in a given scenario is not specified in the auditing standards.
Definition
The sampling technique
Term
An auditor may decide to increase the risk of incorrect rejection when
Definition
The cost and effort of selecting additional sample items is low.
Term
If an auditor, planning to use statistical sampling, is concerned with the number of a client’s sales invoices that contain mathematical errors, the auditor would most likely utilize
Definition
Sampling for attributes.
Term
There are many kinds of statistical estimates that an auditor may find useful, but basically every accounting estimate is either of a quantity or of an error rate. The statistical terms that roughly correspond to "quantities" and "error rate," respectively, are
Definition
Variables and attributes.
Term
An auditor plans to examine a sample of 20 checks for countersignatures as prescribed by the client’s internal control activities. One of the checks in the chosen sample of 20 cannot be found. The auditor should consider the reasons for this limitation and
Definition
Treat the missing check as a deviation for the purpose of evaluating the sample.
Term
Which of the following statements is correct about the sample size in statistical sampling when testing internal controls?
Definition
The auditor should consider the tolerable rate of deviation from the controls being tested in determining sample size.
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