Auditing: Judgment Bias and Verification
24 Questions
0 Views

Choose a study mode

Play Quiz
Study Flashcards
Spaced Repetition
Chat to lesson

Podcast

Play an AI-generated podcast conversation about this lesson

Questions and Answers

What is the primary purpose of tests of controls in an audit?

  • To evaluate the effectiveness of internal controls in preventing material misstatements (correct)
  • To verify the accuracy of financial statement disclosures
  • To identify areas for improvement in the audit process
  • To detect material misstatements in financial statements
  • Which of the following biases can lead auditors to rely too heavily on initial information when making subsequent judgments?

  • Confirmation bias
  • Overconfidence bias
  • Anchoring bias (correct)
  • Availability bias
  • What is the primary objective of inspection procedures in an audit?

  • To inspect documents and records to verify transactions (correct)
  • To evaluate the effectiveness of internal controls
  • To detect fraud and error in financial statements
  • To verify the accuracy of financial statement disclosures
  • Which of the following is NOT a type of judgment bias that auditors may be susceptible to?

    <p>sampling bias</p> Signup and view all the answers

    What is the primary purpose of reperformance procedures in an audit?

    <p>To re-execute transactions to verify their accuracy</p> Signup and view all the answers

    Which of the following internal controls would an auditor likely test to ensure that transactions are properly authorized?

    <p>Approval procedures for significant transactions</p> Signup and view all the answers

    What is the primary purpose of analytical procedures in an audit?

    <p>To identify unusual or unexpected relationships between financial data</p> Signup and view all the answers

    Which of the following is a potential risk in audit sampling?

    <p>All of the above</p> Signup and view all the answers

    What is the primary objective of tests of controls?

    <p>To evaluate the effectiveness of internal controls in preventing or detecting material misstatements</p> Signup and view all the answers

    What is the purpose of substantive procedures?

    <p>To directly test the accuracy of financial statement amounts and disclosures</p> Signup and view all the answers

    What is audit sampling, and what is one factor to consider when planning an audit sample?

    <p>Audit sampling is selecting a representative subset of the population, and the factor to consider is the sample size</p> Signup and view all the answers

    When are analytical procedures typically used during an audit?

    <p>During the planning phase and during the execution of substantive tests</p> Signup and view all the answers

    What is the purpose of ISA 330?

    <p>To require auditors to collect sufficient and appropriate audit evidence</p> Signup and view all the answers

    What is the primary purpose of collecting audit evidence?

    <p>To provide a basis for the auditor's opinion on the financial statements</p> Signup and view all the answers

    What is the relationship between audit evidence and the evaluation of internal controls?

    <p>Audit evidence is used to evaluate the operating effectiveness of internal controls</p> Signup and view all the answers

    What is the purpose of audit procedures?

    <p>To obtain sufficient and appropriate audit evidence</p> Signup and view all the answers

    Which of the following actions would an auditor most likely perform when conducting substantive procedures for a material class of transactions?

    <p>Performing tests of details to identify possible misstatements</p> Signup and view all the answers

    What is the primary purpose of performing analytical procedures in an audit?

    <p>To evaluate the reasonableness of financial data</p> Signup and view all the answers

    When would an auditor likely perform substantive procedures?

    <p>Towards the end of the audit period</p> Signup and view all the answers

    What is the primary objective of tests of details in an audit?

    <p>To identify material misstatements at the transaction level</p> Signup and view all the answers

    Which of the following is an example of a substantive procedure?

    <p>Selecting a sample of transactions to verify their accuracy</p> Signup and view all the answers

    What is the purpose of audit sampling in an audit?

    <p>To make an inference about the population based on the sample results</p> Signup and view all the answers

    Which of the following is a characteristic of effective internal controls?

    <p>They reduce the risk of material misstatement</p> Signup and view all the answers

    What is the relationship between the risk of material misstatement and the scope of substantive procedures?

    <p>The higher the risk, the broader the scope of substantive procedures</p> Signup and view all the answers

    Study Notes

    Audit Procedures

    • Inspectie (Inspection): Examining shipping documents or other sales-related documentation to check if all sales are recorded in the accounting system.
    • Opnieuw uitvoeren (Reperformance): Re-executing selected sales transactions to check if they are correctly processed in the sales process and if all transactions are recorded.

    Judgment Biases

    • Beschikbaarheidsvooroordeel (Availability Bias): Auditors rely too heavily on easily available information without considering other evidence.
    • Bevestigingsvooroordeel (Confirmation Bias): Auditors seek or interpret information in a way that confirms their preconceived ideas.
    • Overmoed (Overconfidence Bias): Auditors overestimate their own abilities, potentially overlooking important red flags.
    • Ankeringsvooroordeel (Anchoring Bias): Auditors rely too heavily on initial information when making later assessments, neglecting new evidence.

    Audit Procedures: ToC vs. SP

    • Tests of Controls (Controlewerkzaamheden op de beheersingsmaatregelen):
      • Evaluate the effectiveness of internal controls in preventing, detecting, and correcting material misstatements at the assertion level.
      • Aim to provide assurance that controls are reliable and can be trusted to prevent or detect material misstatements in financial statements.
    • Substantive Procedures (Materiële controlewerkzaamheden):
      • Designed to detect material misstatements at the assertion level.
      • Used to collect detailed evidence about the existence of misstatements in account balances or disclosures.

    Audit Sampling

    • Audit Sampling: Selecting a representative subset of a population to draw conclusions about the entire population.
    • Factors to consider:
      • Sample size: The size of the sample must be sufficient to draw reliable conclusions.
      • Risk of material misstatement: The higher the risk, the larger the sample size must be to obtain sufficient assurance.

    Analytical Procedures

    • Analytical Procedures: Techniques used by auditors to analyze financial and non-financial data to identify plausible relationships and unusual trends or deviations.
    • When to use:
      • During the planning phase to identify risks.
      • During the execution of substantive tests to discover deviations.
      • During the completion of the audit to make a general assessment of the financial statements.

    Studying That Suits You

    Use AI to generate personalized quizzes and flashcards to suit your learning preferences.

    Quiz Team

    Description

    This quiz covers auditing concepts, including judgment bias and verification techniques, such as inspection and reperformance.

    More Like This

    IT Auditor Objectivity Threats
    62 questions
    Auditor's Tolerable Deviation Rate Quiz
    30 questions
    Auditing and Professional Judgment
    40 questions
    Auditing II - Chapter 11 Quiz
    10 questions
    Use Quizgecko on...
    Browser
    Browser