Accounting 406 Exam 2 || 100% Verified Solutions.
What are the three general types of analytical procedures? correct answers Planning
Substantive
Final
How can analytical procedures help us plan the audit? correct answers They help us to determine
risk and what we do and don't understand
If COGS/Sales in
2013: 60%
2014: 57%
2015: 55%
2016: 30%
What could be the explanation for the decrease in 2016? correct answers They could prematurely
recognize sales but not recording COGS or improperly recording costs or a new revenue stream
2017 2016
CASH 100 98
AR 200 202
INVENTORY 300 10
PP&E 700 705
What could be the explanation of the drop in inventory? correct answers Existence or valuation
issues but if known goes from one plant to two then PP&E would be an issue because it should
have doubled
Substantive Analytical Procedure correct answers Evidence about specific assertions
,Final Analytical Procedures correct answers used as an overall review of the financial
information in the final review stage of the audit
Gut check
When do you use planning analytical procedures? correct answers Always (required)
When do you use substantive analytical procedures? correct answers When sufficiently effective
When do you use final analytical procedures? correct answers Always (required)
Internal control correct answers System that provides reasonable assurance of achievement of
objectives
What are the three parts of internal control? correct answers Operations, Report, and Compliance
Of the three parts of internal control, what do auditors focus on the most? correct answers
Reporting
What are the three parts of the COSO framework? correct answers Objectives, Structure, and
Components
What parts are included in the objectives of the COSO framework? correct answers Operations,
Reporting, Compliance
What parts are included in the Structure of the COSO Framework? correct answers Entity level,
Division, Operating Unit, and Function
What parts are included in the Components of the COSO Framework? correct answers control
environment, risk assessment, control activities, information and communication, monitoring
activities
, What are the components of the control environment? correct answers Tone of the organization
Foundation of internal control
Attitudes
Awareness
Policies
Actions
(Entity) Risk Assessment correct answers Identifying risks
Determining importance and likelihood
Determining actions to address
What things can keep a company from achieving goals
Control Activities correct answers Policies and procedures to carry out management directives
Information and Communication correct answers Identify information
Capture
Communication to the right people
Monitoring correct answers Assess quality of internal controls
Take corrective action
Can help compensate and overcome issues with internal control
Why is gaining an understanding required? correct answers Identify types of potential
misstatements
Pinpoint factors that impact risk of material misstatement
Design tests of controls and substantive procedures
What are the three general types of analytical procedures? correct answers Planning
Substantive
Final
How can analytical procedures help us plan the audit? correct answers They help us to determine
risk and what we do and don't understand
If COGS/Sales in
2013: 60%
2014: 57%
2015: 55%
2016: 30%
What could be the explanation for the decrease in 2016? correct answers They could prematurely
recognize sales but not recording COGS or improperly recording costs or a new revenue stream
2017 2016
CASH 100 98
AR 200 202
INVENTORY 300 10
PP&E 700 705
What could be the explanation of the drop in inventory? correct answers Existence or valuation
issues but if known goes from one plant to two then PP&E would be an issue because it should
have doubled
Substantive Analytical Procedure correct answers Evidence about specific assertions
,Final Analytical Procedures correct answers used as an overall review of the financial
information in the final review stage of the audit
Gut check
When do you use planning analytical procedures? correct answers Always (required)
When do you use substantive analytical procedures? correct answers When sufficiently effective
When do you use final analytical procedures? correct answers Always (required)
Internal control correct answers System that provides reasonable assurance of achievement of
objectives
What are the three parts of internal control? correct answers Operations, Report, and Compliance
Of the three parts of internal control, what do auditors focus on the most? correct answers
Reporting
What are the three parts of the COSO framework? correct answers Objectives, Structure, and
Components
What parts are included in the objectives of the COSO framework? correct answers Operations,
Reporting, Compliance
What parts are included in the Structure of the COSO Framework? correct answers Entity level,
Division, Operating Unit, and Function
What parts are included in the Components of the COSO Framework? correct answers control
environment, risk assessment, control activities, information and communication, monitoring
activities
, What are the components of the control environment? correct answers Tone of the organization
Foundation of internal control
Attitudes
Awareness
Policies
Actions
(Entity) Risk Assessment correct answers Identifying risks
Determining importance and likelihood
Determining actions to address
What things can keep a company from achieving goals
Control Activities correct answers Policies and procedures to carry out management directives
Information and Communication correct answers Identify information
Capture
Communication to the right people
Monitoring correct answers Assess quality of internal controls
Take corrective action
Can help compensate and overcome issues with internal control
Why is gaining an understanding required? correct answers Identify types of potential
misstatements
Pinpoint factors that impact risk of material misstatement
Design tests of controls and substantive procedures
