Audit Planning and Analytical Procedures Quiz

The process of outlining the steps and procedures for an audit engagement.

Sufficient evidence is the quantity of evidence needed, while Appropriate evidence is the quality of evidence.

The level of risk the auditor is willing to accept in concluding that financial statements are not materially misstated.

The susceptibility of an account balance to a material misstatement, before considering internal controls.

Understanding the client's industry and operations.

Expenses associated with conducting an audit.

A misstatement that could influence the decisions of a reasonable user of the financial statements.

Evaluative procedures that use comparisons and analysis of financial data to identify unusual relationships or trends that may indicate risks of material misstatements.

The first step in the audit process, involving client acceptance/continuance, understanding the client, business & industry, and overall audit strategy.

Evaluating if an audit client should be accepted or if the audit should continue.

Acquiring knowledge about the client's business and industry to set the audit plan.

Procedures to use to provide an understanding and assess risks in an audit.

The risk that the auditor expresses an inappropriate audit opinion when the financial statements are materially misstated.

Evaluating and analyzing the risks of material misstatement.

A model used to assess the overall audit risk during the initial audit planning phase.

Risk that affects the auditor's reputation or financial position.

An initial plan outlining the audit approach, considering material misstatement risk areas, client location numbers, and control effectiveness.

Comparing a company's financial ratios to industry or competitor averages to assess performance and potential risks.

Specific areas within a company's operations or financial reporting where inaccuracies are more likely to occur.

Audit procedures used throughout all stages, comparing recorded amounts to expectations, identifying possible misstatements, reducing detailed tests, and evaluating going concern issues.

Things considered during audit planning, such as: revenue sources, customers/suppliers, financing, related parties, industry conditions, and prior control effectiveness.

Understanding the aspects of the industry where the client operates, such as risks, accounting standards, and common inherent risks faced by all firms in that industry.

Potential issues relating to the client's ability to continue operating in the foreseeable future.

Methods used by auditors to compare client data with expectations derived from various sources, including industry data, prior periods, and client-determined forecasts. They help identify potential misstatements.

Data from the industry the client operates in, used to assess if the client's performance falls in line with the industry.

Historical financial data from the client's previous periods, used to see if current results differ significantly from the past.

Forecasts or projections of financial data created by the client itself, used as benchmarks.

Auditor-created estimates of expected financial results based on their understanding of the client and industry.

Information outside of financial statements, such as economic conditions, used in calculating the expected result.

A financial ratio measuring how efficiently a company manages its inventory.

A financial ratio which measures the profitability of a company after deducting the cost of goods sold.

The likelihood that a misstatement exceeding a performance materiality in a segment will not be prevented or detected by the client's internal controls.

The risk that audit evidence for a segment will fail to detect misstatements exceeding the performance materiality amount.

Factors impacting acceptable audit risk include the reliance of external users on the financial statements, likelihood of client financial difficulties after audit completion, and auditor's assessment of management's integrity.

Procedures used to identify and assess the risk of material misstatement. These include inquiries of management, analytical procedures, observation & inspection, discussions among engagement team members, and discussions with predecessor auditors.

The amount of an error in accounting information that could influence a reasonable person's decision. It's like a small error in a recipe that doesn't affect the final product.

The risk that a company will not be able to achieve its objectives. It's like the risk of a business failing.

An auditor checks the financial statements of a company to make sure they are accurate and not materially misstated. They're like a financial detective.

The steps an auditor takes to plan an audit, including understanding the client's business, assessing risks, and developing an audit plan. It's like planning a trip, you need to know where you're going and how you'll get there.