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Test your basic knowledge |
Auditing Vocab
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Subject
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business-skills
Instructions:
Answer 50 questions in 15 minutes.
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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. 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.
Reliance strategy
Risk of incorrect rejection
Substantive tests of transactions
Illegal acts
2. 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.
Materiality
Statements on Auditing Standards
Material Weakness
Professional skepticism
3. A transaction being traced by an auditor from origination through the entity's information system until it is reflected in the entity's financial reports; it encompasses the entire process of initiating - authorizing - recording - processing - and re
Desired confidence level
Walkthrough
Contingent liability
Reliance strategy
4. Tests that concentrate on the details of amounts contained in an account balance and related footnotes.
Tests of details of account balances and disclosures
Financial statement assertions
Tolerable deviation rate
Board of directors
5. A violation of laws or governmental regulations.
Illegal act
Tests of details of account balances and disclosures
Application controls
Engagement risk
6. The auditor's opinion that the financial statements do not present fairly in accordance with generally accepted accounting principles (or other comprehensive basis of accounting) due to a pervasively material misstatement.
Adverse opinion
Working papers
Reperformance
Confirmation
7. Consulting services that may provide advice and assistance concerning an entity's organization - personnel - finances - operations - systems - or other activities
Reliability of evidence
Engagement quality review
Information asymmetry
Management advisory services
8. The risk that the auditor is exposed to financial loss or damage to his or her professional reputation from litigation - adverse publicity - or other events arising in connection wit financial statements audited and reported on.
Relevant Assertions
Statistical sampling
Control activities
Engagement risk
9. An objective for ICFR generally relates to a relevant financial statement assertion and states a criterion for evaluating whether the company's control procedures in a specific area provide reasonable assurance that a misstatement or omission in that
Control risk
Nonsampling risk
Control objective
Expected misstatement
10. The probability that the true but unknown measure of the characteristic of interest is within specified limits.
Scope of the audit
Desired confidence level
Reperformance
Information asymmetry
11. When a subsequent event disclosed in the financial statements occurs after the date of the report but before the issuance of the related financial statements - the auditor may use dual dating. The auditor may use the original date of the report excep
Closest reasonable estimate
Monetary unit sampling
Attribute sampling
Dual dating
12. Audit procedures performed to test the operating effectiveness of controls in preventing or detecting material misstatements at the relevant assertion level.
Monetary unit sampling
Reliance strategy
Tests of controls
Internal Control
13. 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.
Nonsampling risk
Engagement letter
Audit committee
Business risks
14. Evaluations of financial information made by a study of plausible relationships among both financial and nonfinancial data.
Substantive strategy
Dual dating
Relevant Assertions
Analytical procedures
15. 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.
Computer-assisted audit techniques (CAATs)
Statistical sampling
Reperformance
Desired confidence level
16. Evaluations of financial information made by a study of plausible relationships among both financial and nonfinancial data.
Analytical procedures
ateriality
Generally accepted auditing standards
Application controls
17. Papers that document the evidence gathered by auditors to show the work they have done - the methods and procedures they have followed - and the conclusions they have developed in an audit of financial statements or other type of engagement.
Adverse opinion
Reliance strategy
Working papers
Statements on Auditing Standards
18. Evaluations of financial information made by a study of plausible relationships among both financial and nonfinancial data.
Computer-assisted audit techniques (CAATs)
Materiality
Analytical procedures
Engagement letter
19. A control deficiency - or combination of control deficiencies - that adversely effects the entity's ability to initate - authorize - record - process - or report external financial data reliably in accordance with GAAP such that there is more than a
Tolerable misstatement
Risk of incorrect acceptance
Confidence bound
Significant deficiency
20. The process of correcting a material weakness as part of management's assessment of the effectiveness of ICFR
Qualified opinion
Tests of details of account balances and disclosures
Audit sampling
Remediation
21. Business transactions between individuals and organizations that occur without paper documents - using computers and telecommunication networks.
Electronic (Internet) commerce
Sampling risk
Tests of details of account balances and disclosures
Analytical procedures
22. 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.
Assertions
Statistical sampling
Scope of the audit
Control risk
23. The use of normal distribution theory to estimate the dollar amount of misstatement for a class of transactions or an account balance.
Audit Risk
Audit committee
Analytical procedures
Classical variables sampling
24. 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
Illegal act
Sampling risk
Dual-purpose tests
Audit procedures
25. Statements issued by the AICPA Auditing Standards Boards - considered as interpretations of the 10 GAAS statements.
Statements on Auditing Standards
Ethics
Integrated audit
Tolerable misstatement
26. Evaluations of financial information made by a study of plausible relationships among both financial and nonfinancial data.
Substantive tests of transactions
Substantive tests of transactions
Audit committee
Analytical procedures
27. A state of objectivity in fact and in appearance - including the absence of any significant conflicts of interest.
Inquiry
Independence
Assertions
Reliance strategy
28. A lack of evidence that may preclude the auditor from issuing a clean opinion - usually resulting from an inability to conduct an audit procedure considered necessary.
Auditing
Unqualified audit report
Business risks
Scope limitation
29. 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
Materiality
Statistical sampling
Control deficiency
Classical variables sampling
30. 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.
Material weakness
Electronic data interchange
Board of directors
Control environment
31. The amount of the planning materiality that is allocated to a financial statement account.
Reperformance
Allowance for sampling risk
Material weakness
Tolerable misstatement
32. The policies and procedures that help ensure that management's directives are carried out.
Independence
ositive confirmation
Control activities
Control risk
33. An event occurring between the balance sheet date and the audit report release date - Type I - Type II
Subsequent event
Reperformance
Reasonable assurance
Scope of the audit
34. The oversight mechanisms in place to help ensure the proper stewardship over an entity's assets. Management and the board of directors play primary roles - and the independent auditor plays a key facilitating role.
Expected misstatement
Scope of the audit
Internal Control
Corporate governance
35. Controls that apply to the processing of specific computer applications and are part of the computer programs used in the accounting system.
Reporting
ateriality
Application controls
Expected population deviation rate
36. An account or disclosure is significant if there is a reasonable possibility that the account or disclosure could contain a misstatement that - individually or when aggregated with others - has a material effect on the financial statements - consider
Recalculation
Risk of incorrect rejection
Significant account or disclosure
Substantive procedures
37. A process that assesses the quality of internal control performance over time.
Inquiry
Analytical procedures
Classical variables sampling
Monitoring of controls
38. The auditor's decision to rely on the entity's controls - test those controls - and reduce the directs test of financial statement accounts.
Reliance strategy
Management letter
Tests of controls
Closest reasonable estimate
39. Independent professional services that improve the quality of information - or its context - for decision makers. Encompasses attest services and financial statement audits.
Material Weakness
Assurance Services
Risk of incorrect rejection
Board of directors
40. Controls that relate to the overall information processing environment and have a pervasive effect on the entity's computer operations.
General controls
Closest reasonable estimate
Generally accepted accounting principles (GAAP)
Monetary-unit sampling
41. The process of obtaining and evaluation a direct communication from a third party in response to a request for information about a particular item affecting financial statement assertions.
Internal control over financial reporting
Assurance Services
Confirmation
Control activities
42. Seeking information of knowledgeable persons - both financial and nonfinancial - throughout the entity or outside the entity.
Confirmation
Inquiry
Tests of details of account balances and disclosures
Significant account or disclosure
43. An audit inquiry sent to the client's attorneys in order to obtain or corroborate information about litifation - claims - and assessments.
Other comprehensive basis of accounting
Dual dating
Legal letter
Observation
44. A letter that corroborates oral representations made to the auditor by management or by other auditors and documents the continued appropriateness of such representations.
Other information
Reasonable assurance
Representation letter
Analytical procedures
45. A deficiency - or combination of deficiencies - in internal control - such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented - or detected and corrected - on a timely basis.
Material weakness
Nonsampling risk
Detection risk
Substantive strategy
46. A letter that corroborates oral representations made to the auditor by management or by other auditors and documents the continued appropriateness of such representations.
Engagement quality review
Analytical procedures
Expected population deviation rate
Representation letter
47. 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.
General controls
Closest reasonable estimate
Statements on Auditing Standards
Professional skepticism
48. The auditor's decision not to rely on the entity's controls and to audit the related financial statement account by relying more on substantive procedures.
Illegal act
General controls
Generally accepted accounting principles (GAAP)
Substantive strategy
49. Ten broad statements guiding the conduct of financial statement auditing.
Attest
Application controls
Generally accepted auditing standards (GAAS)
Internal control over financial reporting
50. 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
Audit committee
Errors
Observation
Nonsampling risk
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