Auditing Mid-term #2 - Short Answers

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| By Dodonutt

Dodonutt

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Quizzes Created: 4 | Total Attempts: 7,246

Questions: 16 | Attempts: 348 | Updated: Mar 15, 2023

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Short Answer review questions from assigned homework.

Questions and Answers

1.

What is the purpose of an engegement letter? What subjects should be covered in such a letter?
2.

Define what is meant by a related party. What are the auditor's responsibilites for reated parties and related party transactions?
3.

What are the purposed of the preliminary analytical procedures? What types of comparisons are suseful when performing preliminary analytical procedures?
4.

Define the meaning of the term materiality as it is used in account and auditing. What is the relationship between materiality and the phrase obtain reasonable assurance used in the auditor's report?
5.

Distinguish between the terms tolerable misstatement and preliminary judgment about materiality. How are they related to each other?
6.

Define the audit risk model and explain each term in the model. Also, describe which two factors of the model when combined reflet the risk of material misstatement.
7.

Section 404 of the Sarbanes-Okley Act requires management to issue a report on internal contol over financial reporting. identify the specific Section 404 reporting requirements for management.
8.

What is the auditor's responsibility for obtaining an understanding of internal control? How does that responsibility differ for audits of public and non-public companies?
9.

What are the five components of internal control in the COSO internal control framework?
10.

What are the five types of test auditors use to determine whether financial statements are fairly stated? Identify which tests are performed to reduce control risk and which tests are performed to reduce planned detection risk. Also, identify which test will be used by a public company auditor when auditing internal control over financial reporting.
11.

What is the purpose of test of controls? Identify specific accounts on the financial statements that are affected by performing tests of controls for the acquisition and paymennt cycle.
12.

Explain the importance of proper credit approval for sales. What effect do adequate controls in the credit function have on the auditor's evidence accumulation?
13.

List the most imprtant duties that should be segregated in the sales and collection cycle. Explain why it is desirable that each duty be segregated.
14.

List the transaction-related audit objectives for the verification of cash receipts. For each objective, state one internal control that the client can use to reduce the likelihood of misstatements.
15.

Explain the major difference between satistical and nonstatistical sampling. What are the three main parts of statistical and nonstatistical methods?
16.

Define each of the following terms:a) Acceptable risk of assessing control risk too low (ARACR)b) Computed upper exception rate (CUER)c) Estimated population exception rate (EPER)d) Sample exception rate (SER)e) Tolerable exception rate (TER)

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Current Version
Mar 15, 2023

Quiz Edited by
ProProfs Editorial Team
Mar 18, 2010

Quiz Created by
Dodonutt

Auditing Mid-term #2 - Short Answers

What is the purpose of an engegement letter? What subjects should be covered in such a letter?

Define what is meant by a related party. What are the auditor's responsibilites for reated parties and related party transactions?

What are the purposed of the preliminary analytical procedures? What types of comparisons are suseful when performing preliminary analytical procedures?

Define the meaning of the term materiality as it is used in account and auditing. What is the relationship between materiality and the phrase obtain reasonable assurance used in the auditor's report?

Distinguish between the terms tolerable misstatement and preliminary judgment about materiality. How are they related to each other?

Define the audit risk model and explain each term in the model. Also, describe which two factors of the model when combined reflet the risk of material misstatement.

Section 404 of the Sarbanes-Okley Act requires management to issue a report on internal contol over financial reporting. identify the specific Section 404 reporting requirements for management.

What is the auditor's responsibility for obtaining an understanding of internal control? How does that responsibility differ for audits of public and non-public companies?

What are the five components of internal control in the COSO internal control framework?

What is the purpose of test of controls? Identify specific accounts on the financial statements that are affected by performing tests of controls for the acquisition and paymennt cycle.

Explain the importance of proper credit approval for sales. What effect do adequate controls in the credit function have on the auditor's evidence accumulation?

List the most imprtant duties that should be segregated in the sales and collection cycle. Explain why it is desirable that each duty be segregated.

List the transaction-related audit objectives for the verification of cash receipts. For each objective, state one internal control that the client can use to reduce the likelihood of misstatements.

Explain the major difference between satistical and nonstatistical sampling. What are the three main parts of statistical and nonstatistical methods?

Define each of the following terms:a) Acceptable risk of assessing control risk too low (ARACR)b) Computed upper exception rate (CUER)c) Estimated population exception rate (EPER)d) Sample exception rate (SER)e) Tolerable exception rate (TER)