AUD: SIM EXAM 1: CONCLUDING STUDY ON
AUDIT DOCUMENTATION—THE ATTAINMENT
VECTOR FOR PROFESSIONAL
ENDORSEMENT.
◉An auditor ordinarily sends a standard confirmation request to all
banks with which the client has done business during the year under
audit, regardless of the year-end balance. A purpose of this procedure
is to: Answer: Seek information about contingent liabilities and
security agreements in addition to information related to deposit
account balances.
◉Stratified MPU sampling is a statistical technique that may be more
efficient than unstratified MPU because it usually: Answer: Produces
an estimate having a desired level of PRECISION with a SMALLER
SAMPLE SIZE.
◉What management roles would typically be acknowledged in a
MGMT rep letter? Answer: Concerned with representations made by
MGMT to the AUDITORS, not to the audit committee.
MGMT has the responsibility for the design of controls to detect and
prevent fraud.
◉The authority to accept incoming goods in receiving should be
based on an: Answer: Approved PO.
, ◉How are analytical procedures used in planning an audit
engagement? Answer: Often use data aggregated at a high level.
◉Negative assurance may be expressed when an accountant is
requested to report on the: Answer: results of performing a REVIEW
of management's assertion.
◉In obtaining an understanding of an entity's internal control, an
auditor is required to obtain knowledge about the: Answer: DESIGN
of controls and whether they have been IMPLEMENTED.
The auditor is NOT required to obtain knowledge about the
"operating effectiveness of controls" as part of obtaining an
understanding of I/C.
◉Which factor is most relevant when an auditor considers the client's
org structure in the context of control risk? Answer: The suitability of
the client's lines of reporting = control environment.
◉What MGMT control method could most likely improve MGMT's
ability to supervise company activities effectively? Answer:
Establishing budgets and forecasts to identify variances from
expectations --> signals to managers that a potential problem exists.
◉Attribute sampling is primarily used for Answer: testing internal
controls
, ◉Variable sampling and PPS sampling are typically used in Answer:
substantive testing of account balances
◉How to test attribute sampling? Answer: If:
sample deviation rate + allowance for sampling risk (upper deviation
rate) > auditor's tolerable deviation rate,
the auditor would NOT rely on the control.
◉Expected deviation rate Answer: Auditor's best estimate of the rate
of deviation from a prescribed control procedure.
DIRECT relationship to sample size.
◉Discovery Sampling Answer: - Type of attribute sampling
- Population deviation rate is expected to be 0/near 0
- If deviations found: use regular attribute sampling
- If no deviations found: auditor can be 95% certain that the rate of
deviation in the population <= 1%.
◉Stop-or-Go Sampling (Sequential Sampling) Answer: - Type of
attribute sampling
- Designed to avoid oversampling for attributes
- Used when few errors are expected in the population.
AUDIT DOCUMENTATION—THE ATTAINMENT
VECTOR FOR PROFESSIONAL
ENDORSEMENT.
◉An auditor ordinarily sends a standard confirmation request to all
banks with which the client has done business during the year under
audit, regardless of the year-end balance. A purpose of this procedure
is to: Answer: Seek information about contingent liabilities and
security agreements in addition to information related to deposit
account balances.
◉Stratified MPU sampling is a statistical technique that may be more
efficient than unstratified MPU because it usually: Answer: Produces
an estimate having a desired level of PRECISION with a SMALLER
SAMPLE SIZE.
◉What management roles would typically be acknowledged in a
MGMT rep letter? Answer: Concerned with representations made by
MGMT to the AUDITORS, not to the audit committee.
MGMT has the responsibility for the design of controls to detect and
prevent fraud.
◉The authority to accept incoming goods in receiving should be
based on an: Answer: Approved PO.
, ◉How are analytical procedures used in planning an audit
engagement? Answer: Often use data aggregated at a high level.
◉Negative assurance may be expressed when an accountant is
requested to report on the: Answer: results of performing a REVIEW
of management's assertion.
◉In obtaining an understanding of an entity's internal control, an
auditor is required to obtain knowledge about the: Answer: DESIGN
of controls and whether they have been IMPLEMENTED.
The auditor is NOT required to obtain knowledge about the
"operating effectiveness of controls" as part of obtaining an
understanding of I/C.
◉Which factor is most relevant when an auditor considers the client's
org structure in the context of control risk? Answer: The suitability of
the client's lines of reporting = control environment.
◉What MGMT control method could most likely improve MGMT's
ability to supervise company activities effectively? Answer:
Establishing budgets and forecasts to identify variances from
expectations --> signals to managers that a potential problem exists.
◉Attribute sampling is primarily used for Answer: testing internal
controls
, ◉Variable sampling and PPS sampling are typically used in Answer:
substantive testing of account balances
◉How to test attribute sampling? Answer: If:
sample deviation rate + allowance for sampling risk (upper deviation
rate) > auditor's tolerable deviation rate,
the auditor would NOT rely on the control.
◉Expected deviation rate Answer: Auditor's best estimate of the rate
of deviation from a prescribed control procedure.
DIRECT relationship to sample size.
◉Discovery Sampling Answer: - Type of attribute sampling
- Population deviation rate is expected to be 0/near 0
- If deviations found: use regular attribute sampling
- If no deviations found: auditor can be 95% certain that the rate of
deviation in the population <= 1%.
◉Stop-or-Go Sampling (Sequential Sampling) Answer: - Type of
attribute sampling
- Designed to avoid oversampling for attributes
- Used when few errors are expected in the population.
