Lecture 4- The audit process- offsite work (2)

Description

Highers Accounting and Finance (Year 2) (Audit & Assurance) Quiz on Lecture 4- The audit process- offsite work (2), created by George Mariyajohnson on 04/02/2021.
George Mariyajohnson
Quiz by George Mariyajohnson, updated more than 1 year ago
George Mariyajohnson
Created by George Mariyajohnson over 3 years ago
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Resource summary

Question 1

Question
Second stage of audit process is [blank_start]planning audit[blank_end]
Answer
  • planning audit

Question 2

Question
When planning audit, minimising [blank_start]audit risk[blank_end] should be thought about. When looking at minimising [blank_start]audit risk[blank_end] some things need to be thought about such as [blank_start]pre-engagement[blank_end] work (work that happens [blank_start]before[blank_end] auditor gets into [blank_start]audit[blank_end] appointment), [blank_start]post-engagement[blank_end] work (think about [blank_start]pre detailed[blank_end] work so understand [blank_start]entity[blank_end], [blank_start]plan[blank_end] work & [blank_start]design[blank_end] audit procedures)
Answer
  • audit risk
  • audit risk
  • pre-engagement
  • before
  • audit
  • post-engagement
  • pre detailed
  • entity
  • plan
  • design

Question 3

Question
In pre-engagement process, [blank_start]auditors[blank_end] firstly determine whether entity fits their [blank_start]risk[blank_end] profile before [blank_start]accepting[blank_end] engagement. Also, auditors need to consider [blank_start]independence[blank_end] of audit firm & ability to perform work for [blank_start]fee[blank_end]. If not happy do not [blank_start]engage[blank_end], if happy send an [blank_start]engagement letter[blank_end]
Answer
  • auditors
  • risk
  • accepting
  • independence
  • fee
  • engage
  • engagement letter

Question 4

Question
In post engagement process, [blank_start]auditors[blank_end] need to understand [blank_start]entity[blank_end] & its [blank_start]environment[blank_end]. Therefore, they need to build up [blank_start]broad[blank_end] understanding of what [blank_start]entity[blank_end] does, go into more [blank_start]detailed[blank_end] understanding of [blank_start]entity[blank_end] & think about [blank_start]internal[blank_end] controls. Going through this process helps [blank_start]auditor[blank_end] plan their work to minimise [blank_start]detection[blank_end] risk
Answer
  • auditors
  • entity
  • environment
  • broad
  • entity
  • entity
  • detailed
  • internal
  • auditor
  • detection

Question 5

Question
To build up [blank_start]broad[blank_end] understanding, [blank_start]auditors[blank_end] need to meet members of [blank_start]board[blank_end], meet members of [blank_start]audit committee[blank_end], meet head of [blank_start]internal audit[blank_end] & perform [blank_start]analytical[blank_end] procedures. By meeting these individuals & getting an understanding, it helps [blank_start]auditors[blank_end] see key issues or areas they want to [blank_start]focus[blank_end] on in entity
Answer
  • broad
  • auditors
  • board
  • audit committee
  • internal audit
  • analytical
  • auditors
  • focus

Question 6

Question
To build up more [blank_start]detailed[blank_end] understanding, [blank_start]auditors[blank_end] need to think about [blank_start]industrial[blank_end] or [blank_start]commercial[blank_end] sector entity operates in & related [blank_start]risk[blank_end], impact of [blank_start]technological change[blank_end] on industry, public interest entity, growing or declining entity, [blank_start]objectives[blank_end] of entity & how [blank_start]achieving[blank_end] them, financing/gearing, [blank_start]nature[blank_end] of its transactions, subsidiaries/associated companies/investments & [blank_start]experience[blank_end] & [blank_start]length[blank_end] of tenure of management/employees. This information would be included in audit planning [blank_start]memorandum[blank_end]
Answer
  • detailed
  • auditors
  • industrial
  • commercial
  • risk
  • technological change
  • objectives
  • achieving
  • nature
  • experience
  • length
  • memorandum

Question 7

Question
In looking at [blank_start]internal[blank_end] control of entity, [blank_start]auditors[blank_end] need to think about entity’s control [blank_start]environment[blank_end], entity’s [blank_start]risk assessment[blank_end] process, entity’s [blank_start]information[blank_end] system, [blank_start]effectiveness[blank_end] of audit committee & [blank_start]internal[blank_end] audit function (if they have one) & control [blank_start]activities[blank_end] relevant to audit. This would be included in audit planning [blank_start]memorandum[blank_end]
Answer
  • internal
  • auditors
  • environment
  • risk assessment
  • information
  • effectiveness
  • internal
  • activities
  • memorandum

Question 8

Question
When considering who should form engagement team you need to consider [blank_start]experience[blank_end], [blank_start]skills[blank_end], [blank_start]location[blank_end] & use of [blank_start]internal audit[blank_end]
Answer
  • experience
  • skills
  • location
  • internal audit

Question 9

Question
Auditors need to think about [blank_start]designing[blank_end] detailed audit programmes. There will be emphasis on [blank_start]intention[blank_end] to rely on [blank_start]internal[blank_end] controls (make sure controls are working [blank_start]effectively[blank_end]), distinction between [blank_start]major[blank_end] & [blank_start]minor[blank_end] systems & think about level of [blank_start]substantive[blank_end] testing (related to how much [blank_start]detailed[blank_end] testing needs to be completed)
Answer
  • designing
  • intention
  • internal
  • effectively
  • major
  • minor
  • substantive
  • detailed

Question 10

Question
In relation to testing [blank_start]internal[blank_end] controls, auditors intend to rely on their [blank_start]operation[blank_end] to reduce risk of [blank_start]misstatement[blank_end] at assertion level. So auditors have detailed [blank_start]substantive[blank_end] procedures that will not provide [blank_start]sufficient[blank_end] evidence alone at assertion level. Therefore, auditors may need to do [blank_start]more[blank_end] work on [blank_start]tests[blank_end] they have done
Answer
  • internal
  • operation
  • misstatement
  • substantive
  • sufficient
  • more
  • tests

Question 11

Question
Substantive procedures include [blank_start]analytical[blank_end] reviews (i.e. comparing [blank_start]figures[blank_end] from this year & last year), [blank_start]detailed[blank_end] tests of transactions or balances & [blank_start]external[blank_end] confirmations (could be through bank letter, suppliers, etc so getting [blank_start]evidence[blank_end] that is [blank_start]external[blank_end] to client)
Answer
  • analytical
  • figures
  • detailed
  • external
  • evidence
  • external

Question 12

Question
Professional scepticism is an [blank_start]attitude[blank_end] that includes [blank_start]questioning[blank_end] mind, being [blank_start]alert[blank_end] to conditions which may indicate possible [blank_start]misstatement[blank_end] due to error or fraud & critical [blank_start]assessment[blank_end] of audit evidence
Answer
  • attitude
  • questioning
  • alert
  • misstatement
  • assessment

Question 13

Question
In relation to professional scepticism, auditor must be alert to audit evidence that [blank_start]contradicts[blank_end] other audit evidence [blank_start]obtained[blank_end], information that brings into question [blank_start]reliability[blank_end] of documents & [blank_start]responses[blank_end] to inquiries to be used as audit evidence, conditions that indicate possible [blank_start]fraud[blank_end] & circumstances that suggest need for audit [blank_start]procedures[blank_end] in addition to those required by ISAs
Answer
  • contradicts
  • obtained
  • reliability
  • responses
  • fraud
  • procedures

Question 14

Question
Professional judgement is application of relevant [blank_start]training[blank_end], [blank_start]knowledge[blank_end] & [blank_start]experience[blank_end] in making informed [blank_start]decisions[blank_end] about courses of action that are appropriate in [blank_start]circumstances[blank_end] of audit engagement
Answer
  • training
  • knowledge
  • experience
  • decisions
  • circumstances

Question 15

Question
Judgement can become [blank_start]risk[blank_end] area for auditors as [blank_start]financial statements[blank_end] will usually include significant level of [blank_start]estimates[blank_end] such as [blank_start]profitability[blank_end] of long term contracts & judgement about [blank_start]fair[blank_end] values
Answer
  • risk
  • financial statements
  • estimates
  • profitability
  • fair

Question 16

Question
Auditors can approach areas of judgement by evaluating management [blank_start]capability[blank_end] & [blank_start]motivation[blank_end], looking at [blank_start]systems[blank_end] & [blank_start]controls[blank_end] in place to help decision making process, ensuring that [blank_start]estimates[blank_end] are soundly based & considering use of [blank_start]experts[blank_end]
Answer
  • capability
  • motivation
  • systems
  • controls
  • estimates
  • experts

Question 17

Question
Materiality for financial statements as [blank_start]whole[blank_end] & [blank_start]performance[blank_end] materiality must be calculated at [blank_start]planning[blank_end] stages of all audits. Calculation or estimation of materiality should be based on [blank_start]experience[blank_end] & [blank_start]judgement[blank_end]. Materiality for financial statements must be reviewed throughout [blank_start]audit[blank_end] & [blank_start]revised[blank_end] if necessary
Answer
  • whole
  • performance
  • planning
  • experience
  • judgement
  • audit
  • revised

Question 18

Question
Materiality- Relative [blank_start]significance[blank_end] or [blank_start]importance[blank_end] of particular matter in context of financial statements as [blank_start]whole[blank_end]. Matter is material if its [blank_start]omission[blank_end] or [blank_start]misstatement[blank_end] would reasonably [blank_start]influence[blank_end] decisions of user of financial statements
Answer
  • significance
  • importance
  • whole
  • omission
  • misstatement
  • influence

Question 19

Question
With materiality, there are certain [blank_start]percentages[blank_end] or [blank_start]percentage ranges[blank_end] used by auditors
Answer
  • percentages
  • percentage ranges

Question 20

Question
Performance materiality- Amount set by [blank_start]auditor[blank_end] at less than [blank_start]materiality[blank_end] for financial statements as whole to reduce to an appropriately [blank_start]low[blank_end] level probability that [blank_start]aggregate[blank_end] of uncorrected & undetected misstatements exceeds [blank_start]materiality[blank_end] for financial statements as whole
Answer
  • auditor
  • materiality
  • low
  • aggregate
  • materiality

Question 21

Question
Materiality during audit may [blank_start]change[blank_end] if there are changes to [blank_start]draft[blank_end] accounts & [blank_start]evidence[blank_end] during audit testing that there are [blank_start]problems[blank_end] they need to be adjusted
Answer
  • change
  • draft
  • evidence
  • problems

Question 22

Question
Materiality at evaluation stage there is [blank_start]evaluation[blank_end] of effect of any [blank_start]misstatement[blank_end], estimation of potential [blank_start]errors[blank_end] in components of financial statements & in financial statements taken as [blank_start]whole[blank_end], auditors will consider nature of [blank_start]errors[blank_end] & [blank_start]management[blank_end] decides whether to adjust
Answer
  • evaluation
  • misstatement
  • errors
  • whole
  • errors
  • management

Question 23

Question
Materiality at evaluation stage, in evaluating misstatements auditors need to consider [blank_start]size[blank_end] & [blank_start]incidence[blank_end], whether errors exhibit [blank_start]pattern[blank_end], whether errors relate to [blank_start]factual[blank_end] matters or matters of [blank_start]opinion[blank_end], whether errors relate to [blank_start]illegal[blank_end] matters, whether there is suspicion of [blank_start]fraud[blank_end], whether similar errors were discovered in [blank_start]previous[blank_end] year & whether misstatements affect only [blank_start]balance sheet[blank_end] items or [blank_start]profit & loss[blank_end] account too
Answer
  • size
  • incidence
  • pattern
  • factual
  • opinion
  • illegal
  • fraud
  • previous
  • balance sheet
  • profit & loss

Question 24

Question
[blank_start]Qualitative[blank_end] issues need to be considered as auditors need to think about whether [blank_start]item[blank_end] is required to be [blank_start]disclosed[blank_end], whether accounting policies are [blank_start]improperly[blank_end] disclosed & where there is [blank_start]improper[blank_end] classification
Answer
  • Qualitative
  • item
  • disclosed
  • improperly
  • improper

Question 25

Question
Internal controls ensure businesses operate [blank_start]effectively[blank_end]. [blank_start]Auditors[blank_end] need to rely on it because it is good way of [blank_start]reducing[blank_end] their testing (don't need to test many [blank_start]transactions[blank_end])
Answer
  • effectively
  • Auditors
  • reducing
  • transactions
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