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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. 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
Audit committee
Tests of controls
Financial Statement Assertions
Other information
2. The risk that the entity's financial statements will contain a material misstatements whether caused by error or fraud.
Ethics
Risk of material misstatement
Monitoring of controls
Reasonable assurance
3. 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.
Professional skepticism
Audit evidence
Electronic (Internet) commerce
Classical variables sampling
4. A confirmation request to which the recipient responds whether or not he or she agrees with the amount or information stated.
Positive confirmation
Expected population deviation rate
Analytical procedures
Risk of incorrect acceptance
5. Evaluations of financial information made by a study of plausible relationships among both financial and nonfinancial data.
Audit sampling
Analytical procedures
Safeguarding of Assets
Computer-assisted audit techniques (CAATs)
6. A subcommittee of the board of directors that is responsible for the financial reporting and disclosure process.
Allowance for sampling risk
Detection risk
Audit committee
Tolerable misstatement
7. The transmission of business transactions over telecommunication networks.
Electronic data interchange
Integrated audit
Allowance for sampling risk
Significant account or disclosure
8. 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
Control activities
Safeguarding of Assets
Statistical sampling
Generally accepted auditing standards
9. The auditor's decision to rely on the entity's controls - test those controls - and reduce the direct tests of the financial statements accounts.
Classical variables sampling
Scope of the audit
Reliance strategy
Material weakness
10. The risk that the auditor may unknowingly fail to appropriately modify the opinion on materially misstated financial statements.
Audit risk
Significant account or disclosure
Internal Control
ateriality
11. Test of transactions that both evaluate the effectiveness of controls and detect monetary errors.
Entity-level controls
Dual-purpose tests
Material weakness
Internal control
12. An organization created to provide professional accounting-related services - including auditing. Usually formed as a proprietorship or as a form of partnership.
Public accounting firm
Internal control over financial reporting
Control risk
Nonstatistical sampling
13. Expressed or implied representations by management that are reflected in the financial statement components.
Negative confirmation
Sampling risk
Statistical sampling
Assertions
14. 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
Walkthrough
Application controls
Analytical procedures
Assertions
15. A measure of sampling risk added and subtracted to the projected misstatement to form a confidence interval.
Confidence bound
Reliability of evidence
Nonsampling risk
Control objective
16. Business transactions between individuals and organizations that occur without paper documents - using computers and telecommunication networks.
Monetary-unit sampling
Electronic (Internet) commerce
Electronic data interchange
Desired confidence level
17. The records of initial entries and supporting records - such as checks and records of electronic fund transfers; invoices; contracts; the general and subsidiary ledgers - journal entries - and other adjustments to the financial statements that are no
Business processes
Classical variables sampling
Accounting records
Observation
18. 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.
Reperformance
Inherent risk
Other information
Tests of controls
19. Expressed or implied representations by management regarding recognition - measurement - presentation - and disclosure of information in the financial statements.
Assertions
Allowance for sampling risk
Management letter
Reliance strategy
20. Attribute sampling techniques used to estimate the dollar amount of misstatement for a class of transactions or an account balance.
Monetary-unit sampling
Inspections of records and documents
Standards of the PCAOB
Relevant Assertions
21. 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
Confirmation
Upper misstatement limit
Expected misstatement
22. 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
Nonsampling risk
Detection risk
Classical variables sampling
23. 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.
Significant deficiency
Risk of incorrect acceptance
Information asymmetry
Accounting records
24. The process of covering a cash shortage by applying cash from one customer's accounts receivable against another customer's accounts receivable.
Audit procedures
Other comprehensive basis of accounting
Reliance strategy
Lapping
25. 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.
Substantive tests of transactions
Sampling risk
Risk of incorrect acceptance
Attribute sampling
26. The risk that material misstatements that could occur will not be prevented - or detected and corrected - by internal controls.
Audit committee
Control risk
Confirmation
Audit evidence
27. 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.
Positive confirmation
Generally accepted accounting principles (GAAP)
Auditing
Application controls
28. 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
Audit sampling
Reasonable assurance
Management letter
Significant deficiency
29. 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
Reperformance
Dual dating
Reasonable assurance
Confirmation
30. 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
Significant deficiency
Monetary unit sampling
Control risk
31. 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 quality review
Materiality
Analytical procedures
Adverse opinion
32. Intentional misstatements that can be classified as fraudulent financial reporting and/or misappropriation of assets.
Illegal act
Financial Statement Assertions
Sampling unit
Fraud
33. Controls that apply to the processing of specific computer applications and are part of the computer programs used in the accounting system.
Reasonable assurance
Application controls
Computer-assisted audit techniques (CAATs)
Sampling unit
34. Persons elected by the stockholders of a corporation to oversee management and to direct the affairs of the corporation.
Board of directors
Substantive tests of transactions
Tests of details of account balances and disclosures
Materiality
35. Evaluations of financial information made by a study of plausible relationships among both financial and nonfinancial data.
Reasonable assurance
Analytical procedures
Audit Evidence
Internal control over financial reporting
36. Controls that apply to the processing of specific computer applications and are part of the computer programs used in the accounting system.
Reporting
Substantive procedures
Application controls
Audit documentation (working papers)
37. Determination of the mathematical accuracy of documents or records.
Assurance Services
Recalculation
Audit Evidence
Engagement letter
38. 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
Engagement risk
Misstatement
Entity-level controls
Adverse opinion
39. 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.
Analytical procedures
Integrated audit
Ethics
Control environment
40. 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.
Illegal acts
Control deficiency
Expected population deviation rate
Risk of incorrect rejection
41. 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
Information asymmetry
Sampling risk
Reasonable assurance
Audit evidence
42. Substantive tests that concentrate on the details of items contained in the account balance and disclosures.
Confidence bound
Tests of details of account balances and disclosures
ateriality
Engagement risk
43. The auditor's principal record of the work performed and the basis for the conclusions in the auditor's report. It also facilitates the planning - performance - and supervision of the engagement and provides the basis for the review of the quality of
Application controls
Audit documentation (working papers)
Dual dating
Substantive tests of transactions
44. A risk of material misstatement that is important enough to require special audit consideration.
Substantive tests of transactions
Significant risk
Board of directors
Reliability of evidence
45. 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.
Closest reasonable estimate
Corporate governance
Unqualified audit report
Classical variables sampling
46. A systematic process of (1) objectively obtaining an evaluating evidence regarding assertions about economic actions and events to ascertain the degree of correspondence between those assertions and established criteria and (2) communicating the resu
Application controls
Classical variables sampling
Auditing
Audit committee
47. The risk that the auditor will not detect a material misstatement that exists in the financial statements
Reliability of evidence
Detection risk
Assertions
Electronic data interchange
48. 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.
Analytical procedures
Qualified opinion
Scope limitation
ateriality
49. The total of the projected misstatement plus the allowance for sampling risk.
Analytical procedures
Walkthrough
Upper misstatement limit
Unqualified audit report
50. 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
Control deficiency
Professional skepticism
Tests of details of account balances and disclosures
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