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16 Cards in this Set
- Front
- Back
How would abnormal fluctuations in gross profit be identified during the planning phase of the audit? |
Analytical Procedures |
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What is poor evidence on operating effectiveness? |
Confirmations of A/R |
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What is the appropriate response when the assessed level of control risk increases? |
Use a larger sample size for substantive test |
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What are the methods for documenting internal control? |
Checklists Flowcharts Questionnaire Narratives |
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The effectiveness of controls is tested by: |
Inspection of documents and reports Observation of application of accounting policies and procedures Inquiries of management |
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Tracing sales transactions in the sales journal to shipping documents provides what? |
evidence of occurrence of sales transactions |
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What is the most effective way of detecting an erroneously recorded receipt of a bank loan? |
Sending bank confirmation as of year-end |
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When should audit planning be performed? |
At the beginning of the engagement and updated continuously based on information obtained during the performance of audit |
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What should an auditor sample to best test existence? |
From the general ledger to source documents |
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Test of controls are most likely to be performed when? |
Inadequate substantive tests exist to restrict audit risk to an acceptable level |
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What is the purpose of testing internal controls? |
To provide reasonable assurance that internal controls are operating effectively |
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What is a material weakness? |
Condition in which material misstatements are not detected in a timely period by employees in normal course of performing their assigned function |
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What is disadvantage of using statistical sampling |
costs of training staff may be higher |
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What are the 4 broad categories of internal controls |
Performance reviews Information processing Physical controls Segregation of duties |
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What factors must be considered what auditing control environment |
Integrity Commitment to Competence Human Resources Assignment of authority and responsibility Management Philosophy and Operating Style Board of Directors / Audit Committee Organizational Structure |
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What does an auditor's opinion state in the second paragraph |
An audit includes examining evidence on a test basis, supporting the amounts and disclosures in the financial statements |