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Test your basic knowledge |
Auditing Vocab
Start Test
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. Financial statements prepared under regulatory - tax - cash basis - or other definitive criteria having substantial support.
Reliance strategy
Sampling unit
Other comprehensive basis of accounting
Errors
2. Business transactions between individuals and organizations that occur without paper documents - using computers and telecommunication networks.
Electronic (Internet) commerce
ositive confirmation
Positive confirmation
Statistical sampling
3. The risk that material misstatements that could occur will not be prevented - or detected and corrected - by internal controls.
Fraud
Control risk
Sampling risk
Reliance strategy
4. A weakness in the design or operation of a control such that management or employeesm in the normal course of performing their assigned functions - fail to prevent - or detect misstatements on a timely basis.
Control deficiency
Lapping
Information asymmetry
Tests of details of account balances and disclosures
5. The relevance of audit evidence refers to its relationship to the assertion or to the objective of the control being tested.
Relevance of evidence
Classical variables sampling
Audit sampling
Computer-assisted audit techniques (CAATs)
6. A confirmation request to which the recipient responds whether or not he or she agrees with the amount or information stated.
Public accounting firm
General controls
Monitoring of controlsa
Positive confirmation
7. Controls that relate to the overall information processing environment and have a pervasive effect on the entity's computer operations.
Reliance strategy
General controls
Control risk
Control environment
8. 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.
Relevance of evidence
ateriality
Confirmation
Audit evidence
9. 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
Generally accepted accounting principles (GAAP)
Expected misstatement
Business processes
10. The risk that the entity's financial statements will contain a material misstatements whether caused by error or fraud.
Desired confidence level
Risk of material misstatement
General controls
Analytical procedures
11. The risk that the sample supports the conclusion that the recorded account balance is materially misstated when it is not materially misstated.
Risk of inccorect rejection
Application controls
Confirmation
Risk assessment
12. The probability that the true but unknown measure of the characteristic of interest is within specified limits.
Board of directors
Desired confidence level
General controls
Fraud
13. Audit procedures performed to test the operating effectiveness of controls in preventing or detecting and correcting - material misstatements at the relevant assertion level.
Tests of controls
Substantive strategy
Assertions
Remediation
14. 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
Analytical procedures
Engagement quality review
Blank or zero-balance confirmations
15. A measure of sampling risk added and subtracted to the projected misstatement to form a confidence interval.
Confidence bound
Monetary unit sampling
Dual-purpose tests
Tests of details of account balances and disclosures
16. The uncertainty that results from sampling; the difference between the expected mean of the population and the tolerable deviation or misstatement.
Generally accepted auditing standards
Business risks
Allowance for sampling risk
Fraud
17. Standards against which the quality of the auditor's performance is measured.
Legal letter
Illegal acts
Audit evidence
Generally accepted auditing standards
18. The risk that the auditor may unknowingly fail to appropriately modify the opinion on materially misstated financial statements.
Legal letter
Positive confirmation
Control deficiency
Audit risk
19. 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.
Audit sampling
Nonsampling risk
Reliance strategy
Assertions
20. Sampling used to estimate the proportion of a population that possesses a specified characteristic.
Significant deficiency
Attribute sampling
Application controls
Management letter
21. The total of the projected misstatement plus the allowance for sampling risk.
Upper misstatement limit
Material Weakness
Fraud
Analytical procedures
22. Attribute-sampling techniques used to estimaed the dollar amount of misstatement for a class of transactions or an account balance.
Financial statement assertions
Internal Control
General controls
Monetary unit sampling
23. Business transactions between individuals and organizations that occur without proper documents - using computers - and telecommunication networks.
Electronic (Internet) commerce
Relevance of evidence
Tests of controls
Control risk
24. Controls that apply to the processing of specific computer applications and are part of the computer programs used in the accounting system.
Assurance Services
Audit risk
Relevance of evidence
Application controls
25. 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
Attribute sampling
Assurance Services
Business risks
26. The auditor's opinion that the financial statements present fairly - in all material respects - in accordance with generally accepted accounting principles (or other comprehensive basis of accounting)-i.e. - a clean opinion.
Recalculation
Substantive procedures
Unqualified opinion
Application controls
27. 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
Audit Risk
Reliance strategy
Positive confirmation
28. The policies and procedures that help ensure that management's directives are carried out.
Risk assessment
Application controls
General controls
Control activities
29. A management letter is a report to management containing the auditors' recommendations for correcting any deficiencies disclosed by the auditors' consideration of internal control. The management letter also provides recommendations on where the comp
Management letter
Public accounting firm
General controls
Substantive procedures
30. Audit evidence that includes minutes of meetings; confirmations from third parties; industry analysts' reports; comparable data about competitors (benchmarking); controls manuals; information obtained by the auditor from such audit procedures as inqu
Other information
Risk of incorrect acceptance
Audit documentation (working papers)
Risk of incorrect acceptance
31. Basic unit containing the elements of the population to be sampled
Sampling unit
Risk of material misstatement
Engagement letter
Errors
32. 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
Financial Statement Assertions
Engagement quality review
Board of directors
Safeguarding of Assets
33. 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
Corporate governance
Statistical sampling
Representation letter
Generally accepted auditing standards
34. Specific acts performed by the auditor in gathering evidence to determine if specific assertions are met.
Analytical procedures
Illegal acts
Substantive procedures
Audit procedures
35. The auditor's plan for the expected conduct - organization - and staffing of the audit.
Audit strategy
Audit procedures
Monetary unit sampling
Projected misstatement
36. 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.
Control deficiency
Scope limitation
Reperformance
Financial Statement Assertions
37. Controls that relate to the overall information processing environment and have a pervasive effect on the entity's computer operations.
Significant deficiency
General controls
Assertions
Analytical procedures
38. An audit inquiry sent to the client's attorneys in order to obtain or corroborate information about litifation - claims - and assessments.
Substantive procedures
Safeguarding of Assets
Legal letter
Upper misstatement limit
39. Controls that apply to the processing of specific computer applications and are part of the computer programs used in the accounting system.
Control risk
Significant deficiency
Application controls
Illegal acts
40. 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)
Audit procedures
Confirmation
Risk of incorrect acceptance
Unqualified audit report
41. Processes implemented by management to achieve entity objectives. Business processes are typically organized into the following categories: revenue - purchasing. human resource management - inventory management - and financing processes
Monetary-unit sampling
Substantive procedures
Control risk
Business processes
42. The process of covering a cash shortage by applying cash from one customer's accounts receivable against another customer's accounts receivable.
Substantive tests of transactions
Reliance strategy
Lapping
Observation
43. A confirmation request to which the recipient responds whether or not he or she agrees with the amount or information stated.
Adverse opinion
ositive confirmation
Control deficiency
Errors
44. 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
Integrated audit
Significant account or disclosure
Generally accepted auditing standards (GAAS)
45. 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.
Analytical procedures
Other information
ateriality
Substantive procedures
46. 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
Generally accepted auditing standards (GAAS)
Public accounting firm
Significant deficiency
Material weakness
47. An organization created to provide professional accounting-related services - including auditing. Usually formed as a proprietorship or as a form of partnership.
Audit committee
Nonsampling risk
Attest
Public accounting firm
48. Expressed or implied representations by management that are reflected in the financial statement components
General controls
Financial statement assertions
Control deficiency
Reliability of evidence
49. Audit procedures performed to test the operating effectiveness of controls in preventing or detecting material misstatements at the relevant assertion level.
Dual-purpose tests
Tests of controls
Control deficiency
Classical variables sampling
50. The use of normal distribution theory to estimate the dollar amount of misstatement for a class of transactions or an account balance.
Internal Control
Classical variables sampling
Remediation
Control deficiency