Auditing and Assurance Services Test 1
Acceptable Audit Risk - ✔✔ correct answer a measure of how willing the auditor is to accept that the
financial statements may be materially misstated after the audit is completed and an unqualified opinion
has been issued
Audit Strategy - ✔✔ correct answer overall approach to the audit that considers the nature of the client,
risk of significant misstatements, and other factors such as the number of client locations and past
effectiveness of client controls
Budgets - ✔✔ correct answer written records of the client's expectations for the period; a comparison of
budgets with actual results may indicate
whether or not misstatements are likely
Client Business Risk - ✔✔ correct answer the risk that the client will fail to achieve its objectives related
to (1) reliability of financial reporting, (2) effectiveness and efficiency of operations, and (3) compliance
with laws and regulations
Corporate Minutes - ✔✔ correct answer the official record of the meetings of a corporation's board
of directors and stockholders, in which corporate issues such as the declaration of dividends and the
approval of contracts are documented
Engagement Letter - ✔✔ correct answer an agreement between the CPA firm and the client as to the
terms of the engagement for the conduct of the audit and related services
Inherent Risk - ✔✔ correct answer a measure of the auditor's assessment of the likelihood that there are
material misstatements in a segment before considering the effectiveness of internal control
Initial Audit Planning - ✔✔ correct answer involves deciding whether to accept or continue doing
the audit for the client, identifying the client's reasons for the audit, obtaining an engagement letter, and
developing an audit strategy
Related Party - ✔✔ correct answer affiliated company, principal owner of the client company,
, Auditing and Assurance Services Test 1
or any other party with which the client deals, where one of the parties can influence the management
or operating
policies of the other
Related Party Trasnsaction - ✔✔ correct answer any transaction between the client and a related party
Analytical Procedures - ✔✔ correct answer evaluations of financial information through analysis
of plausible relationships among financial and nonfinancial data
Appropriateness of Evidence - ✔✔ correct answer a measure of the quality of evidence; appropriate
evidence is relevant and reliable in meeting audit objectives for classes of transactions, account
balances, and related disclosures
Audit Documentation - ✔✔ correct answer record of the audit procedures performed, relevant audit
evidence, and conclusions the auditor reached
Audit Procedure - ✔✔ correct answer detailed instruction for the collection of a type of audit
evidence
Audit Program - ✔✔ correct answer list of audit procedures for an audit area or an entire audit; the
audit program always includes audit procedures and may also include sample sizes, items to select, and
timing of the tests
Confirmation - ✔✔ correct answer the auditor's receipt of a direct written or electronic response from a
third party verifying the accuracy
of informa tion requested
Current Files - ✔✔ correct answer all audit files applicable to the year under audit
External Document - ✔✔ correct answer a document, such as a vendor's invoice, that has been used
Acceptable Audit Risk - ✔✔ correct answer a measure of how willing the auditor is to accept that the
financial statements may be materially misstated after the audit is completed and an unqualified opinion
has been issued
Audit Strategy - ✔✔ correct answer overall approach to the audit that considers the nature of the client,
risk of significant misstatements, and other factors such as the number of client locations and past
effectiveness of client controls
Budgets - ✔✔ correct answer written records of the client's expectations for the period; a comparison of
budgets with actual results may indicate
whether or not misstatements are likely
Client Business Risk - ✔✔ correct answer the risk that the client will fail to achieve its objectives related
to (1) reliability of financial reporting, (2) effectiveness and efficiency of operations, and (3) compliance
with laws and regulations
Corporate Minutes - ✔✔ correct answer the official record of the meetings of a corporation's board
of directors and stockholders, in which corporate issues such as the declaration of dividends and the
approval of contracts are documented
Engagement Letter - ✔✔ correct answer an agreement between the CPA firm and the client as to the
terms of the engagement for the conduct of the audit and related services
Inherent Risk - ✔✔ correct answer a measure of the auditor's assessment of the likelihood that there are
material misstatements in a segment before considering the effectiveness of internal control
Initial Audit Planning - ✔✔ correct answer involves deciding whether to accept or continue doing
the audit for the client, identifying the client's reasons for the audit, obtaining an engagement letter, and
developing an audit strategy
Related Party - ✔✔ correct answer affiliated company, principal owner of the client company,
, Auditing and Assurance Services Test 1
or any other party with which the client deals, where one of the parties can influence the management
or operating
policies of the other
Related Party Trasnsaction - ✔✔ correct answer any transaction between the client and a related party
Analytical Procedures - ✔✔ correct answer evaluations of financial information through analysis
of plausible relationships among financial and nonfinancial data
Appropriateness of Evidence - ✔✔ correct answer a measure of the quality of evidence; appropriate
evidence is relevant and reliable in meeting audit objectives for classes of transactions, account
balances, and related disclosures
Audit Documentation - ✔✔ correct answer record of the audit procedures performed, relevant audit
evidence, and conclusions the auditor reached
Audit Procedure - ✔✔ correct answer detailed instruction for the collection of a type of audit
evidence
Audit Program - ✔✔ correct answer list of audit procedures for an audit area or an entire audit; the
audit program always includes audit procedures and may also include sample sizes, items to select, and
timing of the tests
Confirmation - ✔✔ correct answer the auditor's receipt of a direct written or electronic response from a
third party verifying the accuracy
of informa tion requested
Current Files - ✔✔ correct answer all audit files applicable to the year under audit
External Document - ✔✔ correct answer a document, such as a vendor's invoice, that has been used
