ACC 442 Lecture Notes - Lecture 10: Preliminary Ruling, Audit Risk, Internal Control

86 views3 pages

indigolion532

18 May 2018

School

Department

Course

Professor

For unlimited access to Class Notes, a Class+ subscription is required.

3 reasons auditor should properly plan the audit engagement

enable auditor to obtain sufficient appropriate evidence for circumstances, help keep costs reasonable,

and avoid misunderstandings with client.

8 steps in audit design and approach

accept client and initial planning, understand clients industry, perform preleminary analytical

procedures, set preliminary judgement of materiality, id significant risks due to fraud or error, assess

inherit risk, understand internal control and control risk, finalize overall audit strategy and plan.

3 risk terms

acceptable audit risk

client business risk

risk of material misstatement

acceptable audit risk

how willing the auditor is to accept the risk he will be sued (level of material misstatement risk)

client business risk

risk that a client may fail (go bankrupt etc)

risk of material misstatement

financial statements inherently contain risk of human error

initial audit planning involves four things

auditor decides whether to accept a new client or continue serving an existing client, id why the client

wants or needs an audit, to avoid misunderstandings the auditor obtains an understanding with the

client about the terms of the engagement, the auditor develops the overall strategy for the audit

including engagement staffing and any required audit specialists.

new client investigation

new auditors are required to communicate with predecessor auditor-due to confidentiality client must

consent, purpose is to determine if client lacks integrity or if there were disputes of accountant

principles.

find more resources at oneclass.com

Unlock document

This preview shows page 1 of the document.
Unlock all 3 pages and 3 million more documents.

Already have an account? Log in

Related Questions

Which of the following statements is most correct regarding the independent auditor's reliance on the tests of controls performed by the internal auditors to reduce their substantive testing?

1-The independent auditor must obtain assurance of the independence of the internal auditors but need not test their work.

2-It is not acceptable for the independent auditor to rely upon the work of the internal auditors.

3-There are no restrictions in relying upon the work of internal auditors.

4-The independent auditor must evaluate the competency and objectivity of the internal auditors and must test a sample of the work of the internal auditors in order to rely upon their work.

The term "materiality" as used in auditing is best described as the

1-substance of the auditing procedures.

2-amount of misstatement on the financial statements that would influence a decision maker.

3-underlying evidence upon which the audit opinion is based.

4-amount of material the auditor gathers as evidence to support the audit opinion.

Prior to accepting an audit client an auditor has a professional obligation to

1-contact the predecessor auditor.

2-perform preliminary analytical review procedures.

3-do all of the listed actions.

4-obtain approval for the audit engagement from the SEC.

Which of the following best represents financial statement fraud?

1-The transfer agent issues 40,000 shares of the company's stock to a friend without authorization by the board of directors.

2-The controller of the company decreases a contingent liability by $3 million so the company will meet analysts' expectations this quarter.

3-The in-house attorney receives payments from the French government for negotiating the development of a new plant in Paris.

4-The accounts receivable clerk covers up the theft of cash receipts by writing off older receivables without authorization.

Sampling risk is the risk that

1-errors are inherent and may be present in the population without regard to the internal controls.

2-the population will not contain characteristics representative of the sample such that inferences made about that sample will be incorrect.

3-internal controls are not adequate to prevent or detect material errors.

4-the sample will not contain characteristics representative of the population such that inferences made about that population will be incorrect.

Control risk that is assessed excessively high (i.e. the auditor believes control risk is high when in reality it is moderate or low) leads to:

1-audit inefficiency.

2-a less expensive audit.

3-reduced substantive testing.

4-errors that are more likely to occur than anticipated.

The purchasing process consists of each of the following phases except

1-receipts of goods and services.

2-approval of items for payment.

3-authorized request for goods and services.

4-cash receipts.

ACC 442 Lecture Notes - Lecture 10: Preliminary Ruling, Audit Risk, Internal Control

Get access

Related Documents

ACCT 107 Lecture Notes - Lecture 11: Audit Risk, Financial Statement

AYB301 Lecture Notes - Lecture 3: Trend Analysis, Inventory Turnover, Audit Risk

Related Questions