Term
| After determining problem, and hearing managements plans to correct going concern issues, what do you do |
|
Definition
| re-evaluate; if doubt remains you modify. If doubt is gone you should disclose the conditions and events.You could issue a disclaimer if need be. |
|
|
Term
| As part of gaining an understanding of internal control an auditor may |
|
Definition
| Interview the client,Review the procedures manual,Perform a transaction review |
|
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Term
|
Definition
|
|
Term
| Auditors generally use a ___________when using PPS; both sampling unit and sampling intervals would be in dollars. |
|
Definition
|
|
Term
| Classical variables sampling methods |
|
Definition
| Difference Estimation, MPU, SMPU, and ratio estimation |
|
|
Term
| Another term for systematic |
|
Definition
|
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Term
|
Definition
| report on a piece of a company (like a subsidiary) |
|
|
Term
| Confirmation of accounts receivable provides evidence in support of |
|
Definition
|
|
Term
|
Definition
| variation of PPS; stands for dollar unit sampling |
|
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Term
|
Definition
| the audtiors probability of not finding the misstatement by random occurance. |
|
|
Term
|
Definition
| frequency of control deviation=deviations/sample size |
|
|
Term
| An imprest account is one |
|
Definition
| That has a balance that does not change |
|
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Term
|
Definition
| bad GAAS problem (often this is per a scope limitation on evidence.) |
|
|
Term
| COSO defined internal control as the process designed to provide |
|
Definition
|
|
Term
| An auditor desires to reduce sampling risk. S/he could |
|
Definition
|
|
Term
|
Definition
| Is used for fraud, its the probability of finding 1 more deviation then you will allow. |
|
|
Term
| EPDR 2%, TDR 6%, risk of setting control risk too low is 5%; table says sample size is 127 (3); if you find only 2 deviations then what is UDR? |
|
Definition
| 5.5% and we can rely on controls and do less substantial tests. |
|
|
Term
| For petty cash an auditor should |
|
Definition
| Consider reviewing account distribution for reimbursements if there is a high volume of activity in the account. |
|
|
Term
| Group auditors should be careful in regard to |
|
Definition
| the investee F/S that a component auditor does since they did not do them themselves |
|
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Term
| If EPDR is 2%, risk of assessing CR too low is 5%, TDR is 8% and SDR is 1%, the allowance for sampling risk will be about |
|
Definition
| 6%; in the presence of SD (sdr) we take sd +/- the average of EPDR and TDR. |
|
|
Term
| An audtior defines his population to 10,000 invoices and takes a sample of invoices numbered 200 to 300 and 5000 to 5100, s/he is probably using |
|
Definition
|
|
Term
| EPDR is 6%, TDR is 8%, do you test the controls (non-public) |
|
Definition
| the sample size would be too large since within 2% of eachother, we would set control risk high and do more substantial tests. |
|
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Term
| If EPDR is 2%, risk of assessing CR too low is 5%, TDR is 8% and SDR is 1%, the auditor |
|
Definition
| will set CR to low; 2+8/2=5+/-1=6% UDR; UDR |
|
|
Term
| If EPDR is 5%, risk of assessing CR to low is 5%, the population is 20,000 items and TDR is 6% the auditor |
|
Definition
| Will probably set CR high, per there is only 1% difference between EPDR and TDR you would have a very large sample size and it would require too much work. |
|
|
Term
| If a auditor is doing a review and they run into a scope limitation, and they can't do a qualified/modified opinion they drop down to? |
|
Definition
| compilation (it is the lower) |
|
|
Term
| If controls are found to be weak (we don't trust controls) then we would use |
|
Definition
|
|
Term
| If the auditor is performing a PPS test and the book value for one item is $20 |
|
Definition
| It will not change the sampling interval; pps looks at population bv |
|
|
Term
| Financial statement auditors must communicate control related matters if |
|
Definition
| The control item may cause a material error,The likelihood of an error occurring is high,The likely error is more than inconsequential |
|
|
Term
| Problem with using systematic/random sample generator |
|
Definition
| you may have some accounts/items with much larger than average numbers and you want these in your sample. |
|
|
Term
| There are two types of Unqualified Opinions reports; one is unmodified "clean opinion" and the other is_______where a emphasis of a matter regarding going concern or change in accounting principles is discussed. |
|
Definition
|
|
Term
| If you are looking at auditors choices and you are in the Incorrect/accept quadrant, is this good or bad |
|
Definition
| bad, we set CR too low and/or incorrect acceptance (substantive test) |
|
|
Term
| If you are looking at auditors choices and you are in the Incorrect/reject quadrant, is this good or bad |
|
Definition
| good, rejection of a incorrect item(risk of incorrect acceptance) |
|
|
Term
| If you are looking at auditors choices and you are in the accept/correct quadrant, is this good or bad |
|
Definition
| good; accepting a item that is correct |
|
|
Term
| If you are looking at auditors choices and you are in the correct/reject quadrant, is this good or bad |
|
Definition
| bad, risk of setting control risk too high; incorrect rejection |
|
|
Term
| In a Compliation you basically |
|
Definition
| Compile the information into F/S form; no assurance, no IC/substantive test, no inquiries, and not independent. |
|
|
Term
|
Definition
| the more understated the less likely we see it; overstatement we will see it so its a good test for existance (overstatement) |
|
|
Term
|
Definition
| potential for mistatement |
|
|
Term
| In a Review, what do you NOT do (in compared to a normal audit) |
|
Definition
| No test of internal controls and No test of details, plus they inquire of managment |
|
|
Term
| We send negative confirmation when |
|
Definition
| The respondent is likely to respond,The controls are strong,There are many small accounts |
|
|
Term
|
Definition
| test of controls (public) and substantive tests (test of details & analytics) |
|
|
Term
| If the auditor is performing a PPS test and the book value for one item is $500, the sampling interval is $50,000, the audit value is $100 and the risk of incorrect acceptance is 5% the auditor will |
|
Definition
| Project an error of $40,000 from this one item; BV-Audit value=x/bv=% mult. by sampling interval =40,000 |
|
|
Term
| In order to do a statistical test, your sample must be |
|
Definition
|
|
Term
|
Definition
|
|
Term
| In public, you must test controls anyways, regardless of |
|
Definition
| the size of the sample this requires (though in practice there may be modifications made.) |
|
|
Term
| If the bank deposit date is 12/31 and the bank withdrawal date is 1/1 |
|
Definition
| There should be an outstanding check |
|
|
Term
| In regards to Auditors responsibility; our goal is to determine _________, __________ and _______ of testing. |
|
Definition
| nature, timing and extent |
|
|
Term
| In regards to audit reports, what is a key word that needs to be in the title? |
|
Definition
|
|
Term
| In regards to internal auditors, we need to assess |
|
Definition
| Their objectivity and competence |
|
|
Term
| The purpose of bank confirmation is |
|
Definition
| To provide evidence in support of the bank balance |
|
|
Term
| Significant deficiency where potential mistake is greater in magnitude |
|
Definition
|
|
Term
| In what sector do we NOT do compilations |
|
Definition
|
|
Term
| In your report, you may NOT state that |
|
Definition
| no significant deficiences were noted (this implies a good opinion of effectiveness of controls which you may not have tested if non public.) |
|
|
Term
| In your report, you may state that |
|
Definition
| no material weaknesses were noted |
|
|
Term
| Management must assess effectiveness |
|
Definition
| as of the end of the most recent fiscal year |
|
|
Term
| Non-sampling risk (human eror) |
|
Definition
|
|
Term
| Objectives of internal control framework as defined by COSO |
|
Definition
| Control environment, risk assessment, accounting information system, control activies, and monitoring |
|
|
Term
| Probability Proportionate to size, used as alternative to classical variables sampling methods for performing substantive tests of transactions or balances. |
|
Definition
|
|
Term
|
Definition
| is a GAAP problem; material and pervasive |
|
|
Term
|
Definition
| theory of attributes sampling to estimate the total dollar amount of misstatement in a population. |
|
|
Term
| Procedures that might show us evidence of a problem in regards to going concern |
|
Definition
| analytics, review of subsequent events, board of directors minutes, inquiry of legal counsel, review of debt and loan agreement compliance |
|
|
Term
| Ratio estimation is preferred when |
|
Definition
| the size of misstatements is nearly proportional to the BV's of the items |
|
|
Term
| What are automatically significant deficiencies? |
|
Definition
| Control weakness over selection and application of GAAP,Antifraud control weakness,Control weakness over non-routine and nonsystemic transactions |
|
|
Term
| When we sign and date the report on 1) last day of fieldwork and 2) report issue date( date it goes to the public) we are |
|
Definition
|
|
Term
| The group auditor is the one who |
|
Definition
| audits biggest portion % of the total operation (biggest piece of the pie). |
|
|
Term
|
Definition
| when a auditor stratifies the population |
|
|
Term
|
Definition
| the variance which lowers sample size so its more efficient if we can figure out how to stratify |
|
|
Term
| Sampling interval is calculated by |
|
Definition
| population BV divided by sample size |
|
|
Term
| In the area of internal control reasonable assurance refers to |
|
Definition
| the Cost benefit of internal control |
|
|
Term
| Sharing responsibility with more than one auditor (firms) in the current year |
|
Definition
|
|
Term
| what is not a acceptable method to document the auditors understanding of internal control |
|
Definition
|
|
Term
| Significant deficiencies in internal control must |
|
Definition
| Be communicated in writing to management and those charged with governance within 60 days of report issue date |
|
|
Term
| what is not a automatic significant deficiency |
|
Definition
| Control weakness over payroll |
|
|
Term
| Your client transfers cash around year end and records the deposit on the books but not the withdrawal. The bank clears the deposit in the current year but not the check. This is an example of: |
|
Definition
| Kiting to inflate earnings |
|
|
Term
| Stop and Go or Sequential sampling |
|
Definition
| add 30 to your sample; may tighten up allowance so you can rely on controls |
|
|
Term
|
Definition
| Controls for variance, therefore the test is more efficient with risk constant. |
|
|
Term
|
Definition
| a population with a large variance (heterogeneous) into 2 or more gorups with smaller variances (homogeneous) |
|
|
Term
|
Definition
| reduce variance; variance is what it is-reflective of population |
|
|
Term
| regarding an auditor’s interaction with the internal audit department |
|
Definition
| Financial statement auditors may use the work that internal auditors already do |
|
|
Term
| Substantial tests are usually cheaper then testing |
|
Definition
|
|
Term
|
Definition
| Internal Control Questionaire |
|
|
Term
|
Definition
| Acceptable method for drawing a sample for a regular or fixed sample size attributes test |
|
|
Term
| The best evidence in support of NRV of accounts receivable is |
|
Definition
|
|
Term
| The foreign corrupt practices act requires |
|
Definition
| Companies under the stewardship of the SEC to have strong controls |
|
|
Term
| To audit cash for existence an auditor could |
|
Definition
| Count the cash,Obtain a cutoff statement,Obtain a bank confirmation |
|
|
Term
| Two methods of non-random sample drawing |
|
Definition
|
|
Term
| Under PPS; the percentage of misstatement in the account is called what? (known as the ____________ which we multiply by the sampling interval.) |
|
Definition
|
|
Term
|
Definition
|
|
Term
| We are not required to perform specific tests for this unless our normal tests lead us to evidence that this is a concern |
|
Definition
|
|
Term
| We send blank confirmation requests when |
|
Definition
| We are attempting to obtain a more conscientious reply |
|
|
Term
| What do we always use for liabilities? |
|
Definition
| Non-random/Judgemental sample (side of B.S.) |
|
|
Term
| When your looking at stratifying a population; you need to consider what in regards to your data? |
|
Definition
| is it relatively easy to gather, and would it show correlation |
|
|
Term
| Which is bigger, significant deficiency or material weakness |
|
Definition
|
|
Term
| Who is responsible for fair and accurate F/S? |
|
Definition
|
|
Term
| Without knowing whether a sample was "properly drawn" |
|
Definition
| You cannot know if its a sampling error (risk) or non-sampling risk (human error.) Do not assume "its likely". |
|
|
Term
| alternate procedures for accounts receivable |
|
Definition
| Get a build-up of the account by invoice,Tie items to shipping documents,Tie items to subsequent receipts |
|
|
Term
| first section of auditor report |
|
Definition
| identifies statements/exactly what you did |
|
|
Term
| What type of sample is needed to do a statistical test |
|
Definition
|
|
Term
| fourth section of auditor report |
|
Definition
|
|
Term
|
Definition
| prepare the confirmation requests,prepare a build-up of account balances by invoice,prepare a schedule of subsequent cash receipts |
|
|
Term
|
Definition
| the population is very spread out |
|
|
Term
| how far out are we responsible for determining if a company is a going concern |
|
Definition
| next 12 mos; but usually less then taht per time periiod is one year from the F/S date; it may not be released for a month or month in half later. |
|
|
Term
| in regards to going concern; what must you consider once you have determined there is a problem |
|
Definition
|
|
Term
|
Definition
| us to managagement talking about any control problems. |
|
|
Term
| method used for related parties work and liabilites when auditing |
|
Definition
|
|
Term
| negative insurance is saying |
|
Definition
| I did this work and nothing came to my attention showing non-compliance with GAAP. |
|
|
Term
| one that adversely affects the ability to initiate, authorize and build a F/S; that could result in a error in F/S. |
|
Definition
|
|
Term
| what should not be done in regards to confirmation requests and your client |
|
Definition
| Have the client mail the confirmation requests |
|
|
Term
| Reports; if something is material but not pervasive, problems with GAAP(GAAP departure)or GAAS , or basis for modification paragraph preceds the opinion pargraph and a "except for" is in place; you are reading what type of report |
|
Definition
| Modified option/Qualified |
|
|
Term
|
Definition
| estimate error, balance and estimate error rate. |
|
|
Term
| second section of auditor report |
|
Definition
| outlines managements responsibility for the F/S using USA GAAP |
|
|
Term
| third section of auditor report outlines |
|
Definition
| auditors responsibility-3 paragraph scope |
|
|
Term
|
Definition
| the measure of distribution of the population |
|
|
Term
| What is easy to implement but creates a cyclical problem of "hit or miss" (in regards to samples/how you collect) |
|
Definition
|
|
Term
|
Definition
| effieciency or sample size, it DOES NOT effect risk. |
|
|
Term
|
Definition
| for the work they already do and work they do for us |
|
|
Term
| what are acceptable methods to document the auditors understanding of internal controls |
|
Definition
| flowchart, narrative and ICQ. |
|
|
Term
|
Definition
| Probability Proportionate to size |
|
|
Term
| what events might give you propondence of evidence? |
|
Definition
| negative trends such as losses and CF, loan defaults, credit problems, restructuring of debt, work stoppages, legal proceedings. |
|
|
Term
| what is not a component of internal controls as defined by COSO |
|
Definition
|
|
Term
| A manipulation causing an amount of cash to be included simultaneously in the balance of two or more bank accounts |
|
Definition
|
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