Auditing CH 5
Manager
Review of work done by staff and senior auditors near the end of the audit to make sure working papers "tie together."
Oral client representations generally ______ considered sufficient audit evidence in themselves
are not
Auditors gather evidence to restrict this risk to the appropriate level.
material misstatement
Auditors are given 60 days after the audit ______ date to complete the audit file.
report release
Audit working papers are the property of the ______.
auditors
Test of account balance
Confirmation of accounts receivable balance
Watching a process or procedure being performed by others is the definition of ______.
observation
Comparing the price on an invoice to that on an approved price list is an example of the audit procedure of...
reperformance
The comparison of relationships between two or more financial statement accounts is called
ratio analysis
The record of the audit procedures performed, relevant audit evidence obtained, and the conclusions the auditors reach is called audit documentation or
working papers
To prove the arithmetical accuracy of the client's analyses and records, auditors make independent
recalculations
The return envelope sent with confirmations should be addressed to the ______.
auditor's office
True or false: Inspection of assets is the best way to determine ownership, valuation, and condition of the assets.
False.
The examination of big data to uncover hidden patterns, unknown correlations, market trends, and other useful business applications is called
data analytics
When obtaining audit evidence, inquiries of knowledgeable persons ______.
may be oral or written and may result in oral or written replies
Making accounting estimates is the responsibility of ______.
management
The price that would be received to sell an asset or the amount that must be paid to transfer a liability in an orderly transaction between market participants is the definition of
Fair value
Working papers are assigned this, which allows the information to be tied together through a system of cross-referencing.
index number
One purpose of the ______ working paper review is to see that the staff assistant has performed the audit procedures properly. Multiple choice question. second partner One purpose of the ______ working paper review is to see that the staff assistant has performed the audit procedures properly.
senior
These components of audit risk exist for a client even if an audit is not performed.
inherent risk and control risk
A sophisticated expectation development technique using statistical models to quantify auditor expectations is ______ analysis. Multiple choice question. cross-sectional A sophisticated expectation development technique using statistical models to quantify auditor expectations is ______ analysis.
regression
In evaluating the appropriateness of audit evidence, auditors consider its ______.
relevance and reliability
Management makes financial statement assertions related to ______.
-classes of transactions and events -presentation and disclosure -account balances
Second partner review
Quality review to provide assurance that the CPA firm's in-house quality control policies have been complied with.
test of disclosure
Test of property, plant, and equipment footnote
test of class of transaction
Tests of inventory purchases to determine if properly accounted for
Auditors use plausible relationships among financial statement data to gather audit evidence about the reasonableness of financial statement amounts when performing...
analytical procedures
Evaluations of financial statement information by a study of relationships among financial and nonfinancial data is the basis of...
analytical procedures
The representation letter should be dated the same as the date of the ______.
auditor's report
Whether it was created within the company (sales invoice) or outside the company (vendor invoice) impacts the reliability of
document evidence.
During an audit, client oral inquiries ______.
may be made of both officers and employees
The most reliable piece of documentary evidence created within the client's organization is ordinarily a ______.
paid check
Helping the auditors identify items that indicate a heightened risk of material misstatement of the financial statements is the objective of analytical procedures ______.
performed at the risk assessment stage
For related party transactions, auditors should be most concerned about obtaining evidence regarding ______.
presentation and disclosure
The use of statistical models to quantify the auditors' expectation about a financial statement amount or ratio is called
regression analysis
The most technical audit working paper review is performed by the ______.
senior
Senior
Review of work performed by staff assistant to make sure audit procedures are performed properly and conclusions are clearly expressed
Categories of traditional financial ratios include ______ ratios
-activity -leverage -profitability -liquidity
Recalculations ______.
-are used to prove the accuracy of client calculations such as earnings per share -include making certain that accounting records agree with the financial statements
True or false: When performing analytical procedures, the best data for developing an expectation is industry averages.
False
Completed confirmations should be sent directly to the ______
auditor
Audit risk for an account or assertion is at an acceptable low level when the auditors have obtained
sufficient appropriate audit evidence.
The advantages of using computer-generated working papers include ______.
-an adjustment can be carried through the current file quicker -a nearly "paperless" audit can be performed -documents can be scanned
When developing expectations for analytical procedures ______.
-dollar amounts, quantities, ratios, or percentages may be used -separate relationships may be computed for each division or product line -prior year financial statements may be used
Auditors are required to ______.
-evaluate the reasonableness of accounting estimates -ensure accounting estimates are properly accounted for and disclosed
Representations in the representation letter include ______.
-financial statements are complete and were prepared with the use of generally accepted accounting principles -all items requiring any disclosure are sufficiently disclosed
Data analytics ______.
-may involve testing entire populations instead of samples -results in a more detailed understanding of the client -may assist in the assessment of risk of material misstatement
Common methods for auditors to determine related parties include ______.
-reviewing SEC filings -conflict-of-interest statements -inquiries of management
True or false: Auditors are not required to use analytical procedures as substantive procedures to provide evidence about financial statement assertions.
True.
External confirmations are normally used to gather evidence for all of the following accounts except ______.
buildings
No information may be discarded from the working papers after the ______ date.
documentation completion
The reliability of customer sales invoices created by the client and held internally depends on the ______.
effectiveness of internal control
Confirmations are generally effective at providing evidence for the ______ assertion.
existance
Management makes assertions for financial statements regarding all of the following except ______. Multiple choice question. properly presented disclosures proper amounts in various accounts fairness of the audit opinion properly recorded transactions owing except ______.
fairness of the audit opinion
Substantive procedures include analytical procedures and tests of details that are part of the auditors'...
further audit procedures
The possibility of material misstatement of an assertion before consideration of the client's internal control is called _____ _____.
inherent risk
Inherent risk and control risk are the two components of the risk of _______ _______.
material misstatement
During an audit, client oral inquiries ______
may be made of both officers and employees
The client ______. never has the right to demand access to the auditors' working papers always has the right to demand access to the auditors' working papers -may only demand access to the auditors' working papers if all fees have been paid
never has the right to demand access to the auditors' working papers
Audit risk is the risk that financial statements will contain a material departure from GAAP and the auditor will issue a(n) ______ opinion.
unmodified
The backbone of the working papers is the ______, which is the key schedule that controls and summarizes all supporting papers
working trial balance
Factors that affect inherent risk include the nature of the ______.
-client's environment -account -client
The audit risk model is a function of ______ risk.
-control -detection -inherent
In-charge partner
Review of entire set of working papers to determine audit was performed in accordance with GAAS and provide support for audit report.
Sufficiency relates to the quantity and relates to the quality of audit evidence needed.
appropriateness
Data analytics is the examination of large datasets or ________ ________ to uncover hidden patterns, unknown correlations, market trends, and other useful business applications.
big data
Audit evidence in paper or electronic form that is obtained through inspection of records is referred to as
documentary
Whether it was created within the company (sales invoice) or outside the company (vendor invoice) impacts the reliability of...
documentary evidence.
A review of client financial statement amounts and ratios over time is called
horizontal analysis
Audit evidence gathered from oral or written inquiries made by the auditor can include ______
oral representations from company personnel written representations from outside parties written representations from company personnel
Individuals or entities that may have dealings with the client in which one party is significantly influenced by the other such that it may not pursue its separate interests are known as
related parties
To identify the specific audit steps performed, auditors use these symbols when preparing the working paper
tick marks