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Flashcards in Audit 8 Deck (20)
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what assertions:
each receivable is collected subsequent to the year end

existence and valuation


What assertion:
each invoice is supported by a customer purchase order



Auditor selects a sample of sales transactions and examines evidence of credit approval - what assertion

valuation or allocation


When you are disclaiming an opinion B/C disagreements that mgmt wont change - what do you include in your report

If you are disclaiming and you are aware of departures from GAAP - it should be appropriately disclosed in an other matter paragraph in the auditor's report


When assessing the competence of Internal auditors the CPA would most likely obtain information about

The quality of the internal auditor's working paper documentation


Increasing product warranty periods without increasing warranty reserves


Relaxing credit policies without changing accounts receivable collectibility assumptions

are actions that management might take to do what:

fraudulently overstate income


Which of these will would allow magma to overstate current ratio:
1- improperly classifying current debt as concurrent

2-Improperly recording expenses as debits to RE

3-Failing to record Interest Expense on Long -Term debt

1Yes - current ratio will be over stated

2-No - only equity and income statements accounts are affected and the current ratio is not

3 yes - not recording interest expense understand accrued interest payable - overstating current ratio


how does materiality increase or decrease affect
Audit Risk

AR - direct
IR - Inverse


Why is the degree to which info tech is used in accounting function an important factor to determine the extent of the documentation of the auditor's understanding of a client's system of internal controls

The form and extend to the documentation is influenced by:
the nature, size, and complexity of the entity,

internal control of the entity (which includes control over the use of technology)

availibility of information from the entity,

and the audit methodology used in the audit


When you are doing an engagement with an attest client - why can't ou prepare routine invoices for the client

- Source documents, including invoices, are designed to initiate action on behalf of either the client,a customer, or a supplier
- As a result preparing source documents involves accepting management responsibility and impair independence


If F/S omit most all of the disclosure, as long as the omissions were not meant to mislead users - what kind of report can you give and what would you change

A compilation report as long as you modify it to say that the disclosures were omitted


what is the primary purpose of TOB

To determine if the controls are operating effectively


When there are many PPE transactions during the year and you want to assess CR at a low level what TOC would you perform

TOC and limited tests of current year property and equipment transactions


Inspecting an entities report of renumbered shipping doc's that have not been recorded in the sales journal test what assertion



When engaged to examine and report on management written assertion about the effectiveness of I/C - what form of report is required

It must be in the form of a separate report that will accompany the accountant report


What departments accounts for unused purchase orders and unused receiving reports

Purchase department for unused PO
and receiving department for unused RR


Since existence is a key concern for PPE - what is a good internal control that if done would justify a reduced assessed level of control risk

If the internal audit staff performs periodic inspections of the equipment - the auditor could reduce the level of substantial testing


Staying current on accounting pronouncements to make sure F/S are being prepared in accordance with GAAP related to which I/C element

Risk assessment


If client has few transactions but each one if material - what do to test - CR? TOC? Sub Test

CR - high
TOC - none
SUb testing - extensive


What does examining shipping documents for matching sales invoices tell you?

It will tell you that good shipped are properly billed