WGU D251 - Advanced Auditing 100% Correct

by components that have no parent but are under common control. Haphazard sampling - ANSWER A nonstatistical sample selection method that attempts to approximate a random selection by selecting sampling units without any conscious bias, or special reason for including or omitting certain items from the sample. Incremental allowance for sampling risk - ANSWER An increase in the total estimated misstatement caused by the statistical properties of misstatements detected in the lower stratum. Individually important locations - ANSWER Locations that are financially significant to the client's financial statements overall. Inherent Risk - ANSWER The susceptibility of an assertion about a class of transaction, account balance, or disclosure to a misstatement that could be material, either individually or when aggregated with other misstatements, before consideration of any related controls. Inventories - ANSWER Items of tangible personal property that are held for sale in the ordinary course of business, that are in the process of production for such sale, or that are to be currently consumed in the production of goods or services to be available for sale. Inventory shrinkage - ANSWER Reduction in inventory presumed to be due to physical loss or theft. key audit matter - ANSWER A matters that, in the auditor's professional judgment, was of most significance in the audit of the financial statements of the current period. Key audit matters are selected from matters communicated to those charged with governance. key performance indicators - ANSWER Quantifiable measures that decision makers can use to evaluate the success of an organization, unit, employee, or account as they seek to meet performance objectives. known misstatements - ANSWER Misstatements that have been specifically identified and about which there is no doubt. Also referred to as known misstatements. lapping - ANSWER A technique used to cover up the embezzlement of cash whereby a cash collection from one customer is stolen by an employee who takes another customer's payment and credits the first customer. This process continues, and at any point in time at least one customer's account is overstated. likely misstatements - ANSWER The best estimate of the actual amount of dollar misstatements in the population based on projecting the sample results to the population. The projected misstatement is calculated as the sampling interval multiplied by the tainting percentage. Also see likely misstatement or most likely misstatement. logical units - ANSWER The balance or transaction that includes the selected dollar in a monetary unit sample. Lower-stratum - ANSWER Items that are not in the top stratum. management letter - ANSWER A letter from the auditor to the client identifying any problems and suggested solutions that may help management improve its effectiveness or efficiency. materiality - ANSWER The magnitude of an omission or misstatement of accounting information that, in view of surrounding circumstances, makes it probable that the judgment of a reasonable person relying on the information would have been changed or influenced by the omission or misstatement. Monetary unit sampling (MUS) - ANSWER A sampling method based on attributes estimation sampling but involving dollar misstatements rather than failure rates. MUS is often referred to as probability proportional to size (PPS) sampling. nature of risk response - ANSWER The types of audit procedures applied given the nature of the account balance and the most relevant assertions regarding that account balance. negative confirmation - ANSWER A request to customers asking them to respond directly to the auditor only if they disagree with the indicated balance. Noncompliance - ANSWER This involves acts of omission or commission by the entity, either intentional or unintentional, which are contrary to the prevailing laws or regulations. nonsampling risk - ANSWER The risk that the auditor reaches an erroneous conclusion for any reason not related to sampling risk. Nonstatistical sampling - ANSWER The application of auditor judgment and experience in a sample application to assist the auditor in determining an appropriate sample size and in evaluating the sample results. other-matter paragraph - ANSWER A paragraph included in the auditor's report that is required by GAAS, or is included at the auditor's discretion, and that refers to a matter other than those presented or disclosed in the financial statements that, in the auditor's professional judgment, is relevant to users' understanding of the audit, the auditor's responsibilities, or the auditor's report. overall materiality - ANSWER A materiality level that the auditor uses in determining whether the financial statements overall are materially correct payroll fraud - ANSWER A general category of fraud that includes timesheet, ghost employee, and worker misclassification frauds. performance materiality - ANSWER A materiality level that the auditor uses for determining significant accounts, significant locations, and audit procedures for those accounts and locations pervasive - ANSWER A term used in the context of misstatements to describe the effects or the possible effects on the financial statements of misstatements that are undetected due to an inability to obtain sufficient appropriate audit evidence. planning materiality - ANSWER A materiality level that the auditor uses in determining whether the financial statements overall are materially correct population - ANSWER A group of transactions or the items that make up an account balance for which the auditor wants to estimate some characteristic, such as the effectiveness of a control procedure or estimate the extent of misstatement in an account. positive assurance - ANSWER An explicit statement as to whether the financial statements are presented fairly. Positive confirmations - ANSWER A request to customers asking them to respond directly to the auditor if they agree or disagree with the indicated balance. posting materiality - ANSWER A materiality level that signifies the misstatements identified throughout the audit that will be considered at the end of the audit in determining whether the financial statements overall are materially correct. probability proportional to size (PPS) sampling - ANSWER A sampling selection method in which each item in the population has a probability of being included in the sample proportionate to the dollar value of the item. Monetary unit sampling uses this method to select a sample and is considered a subset of PPS sampling. Projected misstatements - ANSWER The best estimate of the actual amount of dollar misstatements in the population based on projecting the sample results to the population. The projected misstatement is calculated as the sampling interval multiplied by the tainting percentage. Also see likely misstatement or most likely misstatement. ratio analysis - ANSWER An analytical technique that is useful in identifying significant differences between the client results and a norm (such as industry ratios) or between auditor expectations and actual results; ratio analysis is also useful in identifying potential audit problems that may be found in ratio changes between years. reasonable period of time - ANSWER A period of time not to exceed one year beyond the date of the financial statements being audited.