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To conduct a financial audit means - CORRECT ANSWER -an examination of entity's
books and records, financial accounts, and policites and procedures
Financial audits are performed by - CORRECT ANSWER -external, independent
auditors who are certified public accountants (CPA'S)
In conducting an audit, the auditor must - CORRECT ANSWER -rely on the
company's internal controls
Internal controls - CORRECT ANSWER -Procedures and systems designed to:
Promote efficiency, safeguard assets, avoid fraud and errors, and keep accounting
data accurate.
Board of directors - CORRECT ANSWER -Elected by stockholders to represent
stockholders to management
external auditors - CORRECT ANSWER -give opinions to board of directors
Section 404: Audit of Internal Controls - CORRECT ANSWER -used by auditors
Five elements of Internal Controls - CORRECT ANSWER -Control Environment
(most important): management must set ethical tone for employees, Risk
Assessment: company must realize risks, Control Activities: Company must
establish procedures and policies to protect assets, Information and
, Communication: policies and procedures must be communicated to employees,
Monitoring: must be continual follow up to see how procedures are working.
Sampling - CORRECT ANSWER -using a random subset of the population in order
to form an opinion on the population as a whole
Audit evidence - CORRECT ANSWER -information gathered by the auditors for
their analysis and evaluation
materiality - CORRECT ANSWER -refers to size of error in financial statements. An
error is considered material if it is significant enough.
Fraud triangle (when fraud happens) - CORRECT ANSWER -financial need,
perceived opportunity, rationalization
Sarbanes-Oxley (Sarbox) - CORRECT ANSWER -established public company
accounting oversight board (PCAOB) under SEC to oversee auditing of publicly
held companies
Sarbox Implications for auditors - CORRECT ANSWER -7 year workpaper retention,
second partner review, quality review by PCAOB every year, can't provide
consulting services to audit clients, report to the audit committee, lead auditor
must rotate every 5 years, one year wait before auditor can work for a client.
Sarbox implications for companies - CORRECT ANSWER -Audit Committee: made
up of stockholders of corporation, oversight of internal audit, independent and
one must have financial expertise, hires and receives report from independent
Correct Answers Graded A+ Guaranteed Success!!
To conduct a financial audit means - CORRECT ANSWER -an examination of entity's
books and records, financial accounts, and policites and procedures
Financial audits are performed by - CORRECT ANSWER -external, independent
auditors who are certified public accountants (CPA'S)
In conducting an audit, the auditor must - CORRECT ANSWER -rely on the
company's internal controls
Internal controls - CORRECT ANSWER -Procedures and systems designed to:
Promote efficiency, safeguard assets, avoid fraud and errors, and keep accounting
data accurate.
Board of directors - CORRECT ANSWER -Elected by stockholders to represent
stockholders to management
external auditors - CORRECT ANSWER -give opinions to board of directors
Section 404: Audit of Internal Controls - CORRECT ANSWER -used by auditors
Five elements of Internal Controls - CORRECT ANSWER -Control Environment
(most important): management must set ethical tone for employees, Risk
Assessment: company must realize risks, Control Activities: Company must
establish procedures and policies to protect assets, Information and
, Communication: policies and procedures must be communicated to employees,
Monitoring: must be continual follow up to see how procedures are working.
Sampling - CORRECT ANSWER -using a random subset of the population in order
to form an opinion on the population as a whole
Audit evidence - CORRECT ANSWER -information gathered by the auditors for
their analysis and evaluation
materiality - CORRECT ANSWER -refers to size of error in financial statements. An
error is considered material if it is significant enough.
Fraud triangle (when fraud happens) - CORRECT ANSWER -financial need,
perceived opportunity, rationalization
Sarbanes-Oxley (Sarbox) - CORRECT ANSWER -established public company
accounting oversight board (PCAOB) under SEC to oversee auditing of publicly
held companies
Sarbox Implications for auditors - CORRECT ANSWER -7 year workpaper retention,
second partner review, quality review by PCAOB every year, can't provide
consulting services to audit clients, report to the audit committee, lead auditor
must rotate every 5 years, one year wait before auditor can work for a client.
Sarbox implications for companies - CORRECT ANSWER -Audit Committee: made
up of stockholders of corporation, oversight of internal audit, independent and
one must have financial expertise, hires and receives report from independent
