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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. Attribute-sampling techniques used to estimaed the dollar amount of misstatement for a class of transactions or an account balance.
Nonstatistical sampling
Monetary unit sampling
Positive confirmation
Unqualified audit report
2. A process designed by - or under the supervision of - the company's principal executive and principal financial officers - or persons performing similar functions - and effected by the company's board of directors - management - and other personnel -
Internal control over financial reporting
Analytical procedures
Independence
General controls
3. Business transactions between individuals and organizations that occur without proper documents - using computers - and telecommunication networks.
Monitoring of controlsa
Electronic (Internet) commerce
Misstatement
Board of directors
4. Specific acts performed by the auditor in gathering evidence to determine if specific assertations are being met.
Audit documentation (working papers)
Nonstatistical sampling
Confirmation
Audit procedures
5. 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.
Tests of details of account balances and disclosures
Risk of incorrect acceptance
Generally accepted auditing standards (GAAS)
Entity-level controls
6. A confirmation request to which the recipient responds whether or not he or she agrees with the amount or information stated.
Risk of incorrect rejection
Generally accepted auditing standards (GAAS)
ositive confirmation
Material Weakness
7. 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.
Engagement risk
Illegal act
Illegal acts
Attest
8. 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.
Lapping
Statistical sampling
Business risks
Generally accepted accounting principles (GAAP)
9. The application of an audit procedure to less than 100 percent of the items within an account or class of transactions for the purpose of evaluating some characteristic of the balance or class.
Audit sampling
Monetary-unit sampling
Tests of controls
Substantive strategy
10. The deviation rate that the auditor expects to exist in the population.
Reporting
Generally accepted accounting principles (GAAP)
Expected population deviation rate
Tolerable deviation rate
11. Unintentional misstatements or omissions of amounts or disclosures.
Reliability of evidence
Significant deficiency
General controls
Errors
12. 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
Significant account or disclosure
Significant risk
Business processes
Unqualified opinion
13. The risk that the auditor will not detect a material misstatement that exists in the financial statements
Tests of controls
Audit procedures
Detection risk
Sampling risk
14. The risk that the entity's financial statements will contain a material misstatements whether caused by error or fraud.
General controls
Information asymmetry
Negative confirmation
Risk of material misstatement
15. The amount of the planning materiality that is allocated to a financial statement account.
Qualified opinion
Information asymmetry
Tolerable misstatement
General controls
16. The application of an audit procedure to less than 100 percent of the items within an account or class of transactions for the purpose of evaluating some characteristic of the balance or class.
Walkthrough
Engagement risk
Audit evidence
Audit sampling
17. A 'clean' audit report - indicating the auditor's opinion that a client's financial statements are fairly presented in accordance with agreed-upon criteria (eg. GAAP)
Blank or zero-balance confirmations
Unqualified audit report
Inspections of tangible assets
Subsequent event
18. The total of the projected misstatement plus the allowance for sampling risk.
Reliance strategy
Subsequent event
Upper misstatement limit
Monetary unit sampling
19. Evaluations of financial information made by a study of plausible relationships among both financial and nonfinancial data.
Tests of details of account balances and disclosures
Entity-level controls
Analytical procedures
Control risk
20. The risk that material misstatements that could occur will not be prevented - or detected and corrected - by internal controls.
Application controls
Control risk
Inspections of records and documents
Reliance strategy
21. The end product of the auditor's work indicating the auditing standards followed - and expressing an opinion as to whether an entity's financial statements are fairly presented in accordance with agreed-upon criteria (eg. GAAP)
Confirmation
Remediation
Disclaimer of opinion
Reporting
22. 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.
Information asymmetry
Significant deficiency
Assurance Services
Negative confirmation
23. 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.
Audit procedures
Statistical sampling
Audit evidence
Nonsampling risk
24. An event occurring between the balance sheet date and the audit report release date - Type I - Type II
Projected misstatement
Subsequent event
Professional skepticism
Upper misstatement limit
25. Those policies and procedures that provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition - use - or disposition of the company's assets that could have a material effect on the financial statements
Tests of controls
General controls
Safeguarding of Assets
Tolerable misstatement
26. The probability that the true but unknown measure of the characteristic of interest is within specified limits.
Control risk
Internal control
Lapping
Desired confidence level
27. A confirmation request to which the recipient responds only if the amount or information stated is incorrect.
Reliance strategy
Substantive strategy
Substantive tests of transactions
Negative confirmation
28. 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.
Control activities
Board of directors
Working papers
Audit sampling
29. Controls that have a pervasive effect on the entity's system of internal control such as controls related to the control environment; controls over management override; the company's risk assessment process; centralized processing and controls - incl
Audit strategy
Control deficiency
Entity-level controls
Analytical procedures
30. The concept that an audit done in accordance with auditing standards may fail to detect a material misstatement in a client's financial statements. In an auditing context this term has been defined to mean a high - but not absolute level of assurance
Reasonable assurance
Desired confidence level
Risk of material misstatement
Ethics
31. A letter that corroborates oral representations made to the auditor by management or by other auditors and documents the continued appropriateness of such representations.
Representation letter
Tests of details of account balances and disclosures
Upper misstatement limit
Ethics
32. A range of acceptable amounts or a precisely determined point estimate for an estimate (eg. uncollectible receivables) - if that is a better estimate than any other amount
Computer-assisted audit techniques (CAATs)
Materiality
Closest reasonable estimate
Walkthrough
33. The process of obtaining and evaluating direct communication from a third party in response to a request for information about a particular item affecting financial statement assertions.
Confirmation
ositive confirmation
Audit risk
Substantive tests of transactions
34. 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
Fraud
Ethics
Control deficiency
Statements on Auditing Standards
35. Intentional misstatements that can be classified as fraudulent financial reporting and/or misappropriation of assets.
Relevance of evidence
Fraud
Internal control over financial reporting
Statistical sampling
36. Audit procedures performed to test the operating effectiveness of controls in preventing or detecting material misstatements at the relevant assertion level.
Confirmation
Sampling unit
Tests of controls
Generally accepted auditing standards (GAAS)
37. 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.
Engagement risk
General controls
Materiality
Application controls
38. 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
Classical variables sampling
Computer-assisted audit techniques (CAATs)
Substantive strategy
39. 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
Unqualified opinion
Management letter
Control deficiency
Reliability of evidence
40. A violation of laws or governmental regulations.
Monetary unit sampling
Materiality
Information asymmetry
Illegal act
41. The auditor's decision to rely on the entity's controls - test those controls - and reduce the directs test of financial statement accounts.
Audit procedures
Substantive strategy
Reporting
Reliance strategy
42. Test to detect errors or fraud in individual transactions.
Material weakness
Errors
Control deficiency
Substantive tests of transactions
43. Tests that concentrate on the details of amounts contained in an account balance and related footnotes.
Information asymmetry
Tolerable deviation rate
Management letter
Tests of details of account balances and disclosures
44. Standards regarding the conduct of financial statement auditing for public companies. Currently - consist primarily of standards and statements established by the AICPA's Auditing Standards Board - as these statements and standards were adopted by th
Risk assessment
Standards of the PCAOB
Electronic (Internet) commerce
Working papers
45. Evaluations of financial information made by a study of plausible relationships among both financial and nonfinancial data.
Positive confirmation
Assertions
Control environment
Analytical procedures
46. 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.
Monetary-unit sampling
Control environment
Fraud
Substantive procedures
47. The use of normal distribution theory to estimate the dollar amount of misstatement for a class of transactions or an account balance.
Nonsampling risk
Audit risk
Internal control over financial reporting
Classical variables sampling
48. 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
Generally accepted auditing standards
Engagement risk
Audit committee
Assertions
49. Audit sampling that relies on the auditor's judgment to determine sample size - select the sample - and/or evaluate the results for the purpose of reaching a conclusion about the population.
Standards of the PCAOB
Scope of the audit
Nonstatistical sampling
Analytical procedures
50. The method by which an entity's board of directors - management - and other personnel provide reasonable assurance about the achievement of objectives in the following categories: (1) reliability of financial reporting - (2) effectiveness and efficie
Reliance strategy
Materiality
Safeguarding of Assets
Internal control