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Flashcards in Module 13 Deck (25)
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1
Q

What are the 5 reasons auditors plan?

A
Attention directed to important areas
Problems identified and resolved early
Selection of staff
Effectively and efficiently 
Direction and supervision
2
Q

Overall audit strategy sets out

A

Scope timing and direction of audit

3
Q

Understanding the entity requires what aspects?

A
Nature
Accounting policies
Objectives 
Measurement 
Internal control
Industry factors 

NAOMII

4
Q

Risk assessment procedures?

A

Analytical
Enquiry
Inspection
Observation

AEIO
U Recalculation

5
Q

What are analytical procedures?

A

Involve evaluation of financial info through analysis of plausible relationships

6
Q

What are the 5 analytical procedure techniques and when are they commonly used?

A

Comparison - planning and completion
Ratio analysis - planning
Reasonableness test- planning and substantive
Trend analysis- substantive
Large and unusual items review - substantive

7
Q

What are the three types of materiality?

A

Overall
Performance
Specific items

8
Q

Timing of materiality calculation

A

Estimated during planning

Reassessed throughout audit

9
Q

Misstatement can arise as a result of?

A

Fraud or error

10
Q

What is fraud?

A

An intentional act involving deception and often collusion to obtain and unjust or illegal advantage

11
Q

What are the two types of fraud?

A

Fraudulent financial reporting

Missapropration of Assets

12
Q

What are the three fraud risk factors?

A

Incentive or pressures IR
Opportunities CR
Rationalisations IR

13
Q

What are the three types of materiality?

A

Overall
Performance
Specific items

14
Q

What is overall materiality?

A

Threshold as to what is significant to the financial statements as a whole

15
Q

What is performance materiality?

A

Set below overall materiality to reduce probability that uncorrected/undetected misstatements exceed overall materiality to an acceptable low level

Used to perform testing

16
Q

What is specific items materiality?

A

Individual accounts or disclosures may have their own lower level

Judged to be material in own right

17
Q

Common example of materiality bases?

A

1% revenue
5% PBT
2% net assets

Professional judgement to set

18
Q

Performance materiality is set as?

A

A percentage of overall materiality

19
Q

What is fraudulent financial reporting?

A

Intentional manipulation of financial information to obtain unjust or illegal advantage

20
Q

What is misappropriation of assets?

A

Intentional theft of company assets or inappropriate and unauthorised use of company assets

21
Q

Directors responsibility in relation to fraud?

A

Preventing and detecting by implementing a sound system of internal controls

22
Q

Auditor responsibilities in relation to fraud?

A

Only responsibility for obtaining reasonable assurance that the statements are free from material misstatement

Professional scepticism

Cannot be held responsible for detection and prevention of fraud

23
Q

Fraud risk at planning stage?

A

Auditor must consider ROMM due to fraud as part of overall risk assessment

24
Q

Three categories of fraud risk factors?

A

Incentives or pressures - motivate (IR)
Opportunities - allow (CR)
Rationalisations - believe that it is justifiable or acceptable (IR)

25
Q

High risk of fraud will result in a?

A

Higher ROMM

Detection risk will be low, perform additional procedures to collect sufficient appropriate evidence