Flashcards
Auditing chapter 1
Cards in this deck (25)
- 1Who are the main users of financial statements?Lenders
Borrowers
Shareholders
Investors
Employees
Government
Public
Lenders - 2What is the distinction between auditing and accounting?Accounting is recording, classifying and summarizing of economic events to provide financial information for decision making
Auditors focus on determining whether recorded information properly reflects the economic events that occurred during the accounting period - 3What is auditingAuditors focus on determining whether recorded information properly reflects the economic events that occurred in the accounting period
In addition to understanding accounting, auditors must possess expertise in the accumulation and interpretation of audit evidence - 4What is accounting?The recording, classifying and summarizing of economic events to provide financial information for decision making
- 5What makes information useful?RAVTRUC
Relevant
accessible
verifiable
Timely
Reliable
Understadable
complete - 6What is meant by determining the degree of correspondence between information and established criteria?To do an audit, information must be in a verifiable form and some standards by which the auditor can evaluate the information. Determining the degree of correspondence between info and criteria is determining whether a given set of info is in accordance with the criteria
- 7What are the major causes of information risk?Remoteness of information
Biases and motives of the provider
Voluminous data
Existence of complex exchange transactions - 8How can information risk be reduced?User verifies the information
User shares the info risk with management
Audited financial statements are provided - 9What are the three main types of audit?Operational
Compliance
Audits of financial statements - 10What are the similarities and differences among each type of audit?
- 11What are the similarities among each type of auditors?
- 12What changes in accounting and business operations over the last decade have increased the need for independent audits?Increased global activities: multiple product lines and transaction locations; foreign exchange affects transactions
Complex accounting and exchange transactions: increasing use of derivatives and hedging activities; increasingly complex accounting standards
More complex information systems: possibly millions of transactions processed daily through on-line and traditional sales channels; voluminous data requires interpretation - 13Information riskReflects the possibility that the information upon which the business risk decision was made was inaccurate, a likely cause is inaccurate financial statements
- 14Auditors nightmare ismaterial misstatement
- 15Assurance serviceAn independent professional service to improve the quality of information for decision makers
- 16Attestation serviceA form of assurance service in which the CPA firm issues a report about the reliability of an assertion that is the responsibility of another party
- 17Audit servicesA form of attestation service in which the auditor expresses a written conclusion about the degree of correspondence between information and established criteria
- 18Different forms of evidence a tax auditor will need in the audit of the tax return of a companyElectronic and documentary data about transactions
Written and electronic communication with outsiders
observations by the auditor
Oral testimony of the client - 19Rules of accountingCriteria used by the auditor for evaluating presentation of economic events for financial statements
- 20What are the advantages and disadvantages of the 3 different ways to reduce information risk?
- 21What are the 4 categories of attestations service?Audit of historical financial statements
Audit of internal control over financial reporting
Review of historical financial statements
Other attestation services that may be applied to a broad range of subject matter - 22Similarities of financial statement audits, operational audits and compliance auditsEach type of audit involves accumulating and evaluating evidence about information to ascertain and report on the degree of correspondence between the information and established criteria and/or procedures, rules and regulations
- 23Differences of financial statement audits, operational audits and compliance auditsThe information being examined and criteria used to evaluate the information
- 24What are the three primary requirements to become a CPAEducational: an undergrad or grad degree in accounting
Uniform CPA examination requirement: 4 part computer exam incl. auditing/attestation/financial accounting/reporting/regulation/business environment and concepts
Experience requirement: varies state to state - 25What is the distinction between auditing and accounting?Accounting: recording, classifying and summarizing of economic events to provide information for decision making
Auditing: focus on determine whether information recorded properly reflects the economic events that occurred in that accounting period
In addition to understanding accounting, auditors must expertise in the accumulation and interpretation of audit evidence
Information
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- Fundamentals of auditing (Auditing Chapter 1) Flashcards on Auditing chapter 1, created by Anastasia Mazierski on 04/04/2019.
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- Anastasia Mazierski
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