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Test your basic knowledge |
Auditing Vocab
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Study First
Subject
:
business-skills
Instructions:
Answer 50 questions in 15 minutes.
If you are not ready to take this test, you can
study here
.
Match each statement with the correct term.
Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.
This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. A deficiency in internal control exists when the design or operation of a control does not allow management or employees - in the normal course of performing their assigned functions - to prevent - or detect and correct misstatements on a timely basi
Control deficiency
Board of directors
Reasonable assurance
Other comprehensive basis of accounting
2. Examination of internal or external records or documents that are in paper form - electronic form - or other media.
Representation letter
Financial Statement Assertions
Electronic (Internet) commerce
Inspections of records and documents
3. The risk that the sample supports the conclusion that the control is operating effectively when it is not or that the recorded account balance is not materially misstated when it is materially misstated.
Risk of incorrect acceptance
Relevant Assertions
Control objective
Application controls
4. The tone of an organization - which reflects the overall attitude - awareness - and actions of the board of directors - management - and owners influencing the control consciousness of its people.
Control environment
Financial statement assertions
Inspections of records and documents
Internal Control
5. Ten broad statements guiding the conduct of financial statement auditing.
Audit risk
Engagement letter
Scope of the audit
Generally accepted auditing standards (GAAS)
6. The risk that the sample supports the conclusion that the control is operating effectively when it is not or that the recorded account balance is not materially misstated when it is materially misstated.
Reliability of evidence
Tolerable misstatement
Analytical procedures
Risk of incorrect acceptance
7. Controls that apply to the processing of specific computer applications and are part of the computer programs used in the accounting system.
Illegal acts
Assertions
Generally accepted auditing standards
Application controls
8. The use of normal distribution theory to estimate the dollar amount of misstatement for a class of transactions or an account balance.
Classical variables sampling
Audit Evidence
Information asymmetry
Computer-assisted audit techniques (CAATs)
9. The risk that material misstatements that could occur will not be prevented - or detected and corrected - by internal controls.
Control risk
Significant deficiency
Financial statement assertions
Analytical procedures
10. A confirmation request to which the recipient responds only if the amount or information stated is incorrect.
Monitoring of controlsa
Monitoring of controls
Substantive tests of transactions
Negative confirmation
11. Specific acts performed as the auditor gathers evidence to determine if specific audit objectives are being met.
Audit procedures
Risk of incorrect rejection
Illegal act
Management letter
12. A deficiency - or combination of deficiencies - in internal control - such that there is a reasonable possibility that a material misstatememnt of the entity's financial statements will not be prevent - or detected and corrected on a timely basis.
Tests of details of account balances and disclosures
Generally accepted auditing standards
Detection risk
Material weakness
13. Sampling used to estimate the proportion of a population that possesses a specified characteristic.
Control environment
Sampling unit
Statistical sampling
Attribute sampling
14. Attribute-sampling techniques used to estimaed the dollar amount of misstatement for a class of transactions or an account balance.
Statistical sampling
Monetary unit sampling
Material Weakness
Corporate governance
15. Existing condition or set of circumstances involving uncertainty about a possible loss that will ultimately be resolved when some future event occurs or fails to occur.
Analytical procedures
Contingent liability
Scope limitation
Assertions
16. An attitude that includes a questioning mind and a critical assessment of an audit evidence. The auditor should not assume that management is either honest or dishonest.
Analytical procedures
Professional skepticism
Monetary-unit sampling
Sampling risk
17. Sampling that uses the laws of probability to select and evaluate the results of an audit sample - thereby permitting the auditor to quantify the sampling risk for the purpose of reaching a conclusion about the population.
Statistical sampling
Control activities
Material Weakness
Analytical procedures
18. The risk that the sample supports the conclusion that the control is not operating effectively when it actually is or that the recorded account balance is materially misstated when it is not materially misstated.
Substantive strategy
Risk of incorrect rejection
Lapping
Tolerable deviation rate
19. A letter that corroborates oral representations made to the auditor by management or by other auditors and documents the continued appropriateness of such representations.
Application controls
Representation letter
Analytical procedures
Legal letter
20. Computer programs that allow auditors to test computer files and databases.
Assertions
Reliance strategy
Computer-assisted audit techniques (CAATs)
Analytical procedures
21. The risk that material misstatements that could occur will not be prevented - or detected and corrected - by internal controls.
Control risk
Engagement risk
Tolerable misstatement
Engagement quality review
22. A committee consisting of members of the board of directors - charged with overseeing the entity's system of internal control over financial reporting - internal and external auditors - and financial reporting process. Members typically must be indep
Classical variables sampling
Risk assessment
Audit committee
Legal letter
23. Audit procedures performed to test the operating effectiveness of controls in preventing or detecting material misstatements at the relevant assertion level.
Tests of controls
Other information
Other comprehensive basis of accounting
General controls
24. The auditor's independent execution of procedures or controls that were originally performed as part of other entity's internal control - either manually or through the use of CAATs.
Analytical procedures
Inspections of tangible assets
Qualified opinion
Reperformance
25. The uncertainty that results from sampling; the difference between the expected mean of the population and the tolerable deviation or misstatement.
Allowance for sampling risk
Representation letter
Audit procedures
Projected misstatement
26. All the information used by the auditor in arriving at the conclusions on which the audit opinion is based - and includes the information contained in the accounting records underlying the financial statements and other information such as minutes of
Disclaimer of opinion
Illegal act
Audit evidence
Material Weakness
27. The process of covering a cash shortage by applying cash from one customer's accounts receivable against another customer's accounts receivable.
Statistical sampling
Confirmation
Control deficiency
Lapping
28. Evaluations of financial information made by a study of plausible relationships among both financial and nonfinancial data
Statistical sampling
Analytical procedures
Disclaimer of opinion
Generally accepted auditing standards (GAAS)
29. The auditor's decision not to tely on the entity's controls and to audit the related financial statement accounts by relying more on substantive procedures.
Statements on Auditing Standards
Control deficiency
Substantive strategy
Control environment
30. Accounting principles that are generally accepted for the preparation of financial statements in the United States. GAAP standards are currently issued primarily by the FASB - with oversight and influence by the SEC.
Reliance strategy
Significant deficiency
Generally accepted accounting principles (GAAP)
Audit documentation (working papers)
31. The risk that material misstatements that could occur will not be prevented - or detected and corrected - by internal controls.
Analytical procedures
Fraud
Control risk
Expected population deviation rate
32. A deficiency - or a combination of deficiencies - in internal control that is less severe than a material weakness - yet important enough to merit attention by those charged with governance.
Generally accepted auditing standards
Risk of material misstatement
Significant deficiency
Nonsampling risk
33. The possibility that the sample drawn is not representative of the population and that - as a result - the auditor reaches an incorrect conclusion about the reliability of the control - the account balance - or class of transactions based on the samp
Walkthrough
Sampling risk
Board of directors
Reliance strategy
34. The magnitude of an omission or misstatement of accounting information that - in light of surrounding circumstances - makes it probable that the judgment of a reasonable person relying on the information would have been changed or influenced.
Tolerable misstatement
Reasonable assurance
ateriality
Analytical procedures
35. The possibility that the auditor may use inappropriate audit procedures - fail to detect a misstatement when applying an audit procedure - or misinterpret an audit result.
Control objective
Nonsampling risk
Working papers
Reasonable assurance
36. A term that implies some risk that a material misstatement could be present in the financial statements without the auditor detecting it - even when the auditor has exercised due care.
Audit committee
Reasonable assurance
Generally accepted auditing standards
Audit Risk
37. Refers to the nature - timing - and extent of audit procedures - when nature refers to the type of evidence; timing refers to when the evidence will be gathered; and extent refers to how much of the type of evidence will be evaluated.
Desired confidence level
Reliance strategy
Scope of the audit
Material weakness
38. The relevance of audit evidence refers to its relationship to the assertion or to the objective of the control being tested.
Control risk
Relevance of evidence
Inspections of tangible assets
Auditing
39. The individual member of the population being sampled.
Analytical procedures
Computer-assisted audit techniques (CAATs)
Sampling unit
Statements on Auditing Standards
40. The auditor's decision to rely on the entity's controls - test those controls - and reduce the direct tests of the financial statement accounts.
Reliance strategy
Integrated audit
Audit committee
General controls
41. The concept that the manager generally has more information about the true financial position and results of operations of the entity than the absentee owner does.
Monitoring of controlsa
Information asymmetry
Safeguarding of Assets
Statistical sampling
42. Controls that relate to the overall information processing environment and have a pervasive effect on the entity's computer operations.
Sampling unit
Closest reasonable estimate
Significant deficiency
General controls
43. A confirmation request on which the recipient fills in the amount or furnishes the information requested.
Audit evidence
Blank or zero-balance confirmations
Confidence bound
Legal letter
44. Independent professional services that improve the quality of information - or its context - for decision makers. Encompasses attest services and financial statement audits.
Business processes
Audit committee
Assurance Services
Integrated audit
45. Expressed or implied representations by management about information that is reflected in the financial statements. The three sets of assertions related to ending account balances - transactions - and presentation and disclosure.
Financial Statement Assertions
Substantive tests of transactions
Application controls
Sampling unit
46. A risk of material misstatement that is important enough to require special audit consideration.
Substantive procedures
Computer-assisted audit techniques (CAATs)
Significant risk
Unqualified opinion
47. The susceptibility of an assertion to material misstatement - assuming no related controls
Integrated audit
General controls
Inherent risk
Generally accepted accounting principles (GAAP)
48. Audit procedures performed to test the operating effectiveness of controls in preventing or detecting material misstatements at the relevant assertion level.
Assurance Services
Integrated audit
Tests of controls
Generally accepted auditing standards (GAAS)
49. The risk that the auditor may unknowingly fail to appropriately modify the opinion on materially misstated financial statements.
Significant deficiency
General controls
Audit risk
Scope limitation
50. The risk that the auditor may unknowingly fail to appropriately modify his or her opinion on financial statements that are materially misstated.
Assertions
Risk of inccorect rejection
Legal letter
Audit Risk