Audit Midterm

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Audit Midterm
2010-10-18 20:41:10
Audit midterm

Audit Midterm
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  1. Auditing
    systematic process of objectively obtaining and evaluating evidence regarding assertions
  2. Attestation
    when a practicenter is engaged to issue a report on subject matter or an assetion that is the responsibility of another party
  3. Assurance
    independnet professional services that improve the quality of information
  4. Audit risk
    risk that the auditor may unknowingly fail to approprialy modify their opionion on statments that are materially misstated
  5. Risk of material misstatement
    combination of inherent risk and control risk
  6. Detection risk
    risk that the auditor will not detect a material misstatement. inversly related to RMM
  7. Audit risk model
    AR = RMM * DR or AR = (IR * CR) * DR
  8. Conditions for fraud
    incentive/pressure, opportunity, attitude/rationalization
  9. Planning materiality
    Level of materiallity for the financial statements taken as a whole. The maximum amount by which the statements could be misstated and still not affect the decisions of users.
  10. Tolerable misstatement
    The amount of planning materiality that is allocated to an account or class of transactions
  11. Audit phases
    client acceptance/establish understanding, preliminary activities, plan, audit internal controls, audit business processes, complete the audit, evaluate results and issuer report.
  12. Process categories
    revenue, purchaseing, human resource management, inventory management, financing
  13. Classes of transactions for the peirod assertions
    occurrenc, completeness, authorization, accuracy, cutoff, classification
  14. Account balances at the end of the year assertions
    existence, right & obligations, completeness, valuation & allocation
  15. Presentation and disclosure assertions
    occurrence and rights & obligations, completeness, classification & understandability, accuracy & valuation
  16. General standards
    adequate training & proficiency, maintain independence, due professional care
  17. Field work standards
    adequately plan & supervise, obtain sufficient understanding of the the entity & its environment, obtain sufficient appropriate evidence
  18. Reporting standards
    state in report whether the F/S are in accordance with GAAP, identify inconsistencies, state whether disclosures are adequate, express an opinion
  19. Vouching
    Results to source, occurrence
  20. Tracing
    Source to results, completeness
  21. Audit testing hierarchy
    risk assessment, test of controls, substantive analytical procedures, test of details
  22. Internal control framework
    control environment, entity's risk assessment process, information system, control activities, monitoring
  23. Top-down approach
    identify entity-level controls, identify significant accounts & disclosures, understand the likely sources of misstatements, select controls to test
  24. Type 1 error
    risk of incorrect rejection, risk of under reliance, risk of assessing control risk too high, efficiency
  25. Type 2 error
    risk of incorrect acceptance, risk of overreliance, risk of assessing control risk too low, effectiveness
  26. Computed upper deviation rate
    sample deviation + allowance for sampling risk
  27. Sample deviation rate
    number of deviations / sample size
  28. Planned allowance for sampling risk
    tolerable deviation - expected deviation
  29. Achieved allowance for sampling risk
    upper deviation rate - actual deviation rate