ACC 406 EXAM 2 QUESTIONS & ANSWERS
What are the three general types of analytical procedures? - Answer -Planning
Substantive
Final
How can analytical procedures help us plan the audit? - Answer -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? - Answer -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? - Answer -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 - Answer -Evidence about specific assertions
Final Analytical Procedures - Answer -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? - Answer -Always (required)
When do you use substantive analytical procedures? - Answer -When sufficiently
effective
When do you use final analytical procedures? - Answer -Always (required)
Internal control - Answer -System that provides reasonable assurance of achievement
of objectives
What are the three parts of internal control? - Answer -Operations, Report, and
Compliance
, Of the three parts of internal control, what do auditors focus on the most? - Answer -
Reporting
What are the three parts of the COSO framework? - Answer -Objectives, Structure, and
Components
What parts are included in the objectives of the COSO framework? - Answer -
Operations, Reporting, Compliance
What parts are included in the Structure of the COSO Framework? - Answer -Entity
level, Division, Operating Unit, and Function
What parts are included in the Components of the COSO Framework? - Answer -
control environment, risk assessment, control activities, information and communication,
monitoring activities
What are the components of the control environment? - Answer -Tone of the
organization
Foundation of internal control
Attitudes
Awareness
Policies
Actions
(Entity) Risk Assessment - Answer -Identifying risks
Determining importance and likelihood
Determining actions to address
What things can keep a company from achieving goals
Control Activities - Answer -Policies and procedures to carry out management
directives
Information and Communication - Answer -Identify information
Capture
Communication to the right people
Monitoring - Answer -Assess quality of internal controls
Take corrective action
Can help compensate and overcome issues with internal control
Why is gaining an understanding required? - Answer -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? - Answer -Planning
Substantive
Final
How can analytical procedures help us plan the audit? - Answer -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? - Answer -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? - Answer -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 - Answer -Evidence about specific assertions
Final Analytical Procedures - Answer -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? - Answer -Always (required)
When do you use substantive analytical procedures? - Answer -When sufficiently
effective
When do you use final analytical procedures? - Answer -Always (required)
Internal control - Answer -System that provides reasonable assurance of achievement
of objectives
What are the three parts of internal control? - Answer -Operations, Report, and
Compliance
, Of the three parts of internal control, what do auditors focus on the most? - Answer -
Reporting
What are the three parts of the COSO framework? - Answer -Objectives, Structure, and
Components
What parts are included in the objectives of the COSO framework? - Answer -
Operations, Reporting, Compliance
What parts are included in the Structure of the COSO Framework? - Answer -Entity
level, Division, Operating Unit, and Function
What parts are included in the Components of the COSO Framework? - Answer -
control environment, risk assessment, control activities, information and communication,
monitoring activities
What are the components of the control environment? - Answer -Tone of the
organization
Foundation of internal control
Attitudes
Awareness
Policies
Actions
(Entity) Risk Assessment - Answer -Identifying risks
Determining importance and likelihood
Determining actions to address
What things can keep a company from achieving goals
Control Activities - Answer -Policies and procedures to carry out management
directives
Information and Communication - Answer -Identify information
Capture
Communication to the right people
Monitoring - Answer -Assess quality of internal controls
Take corrective action
Can help compensate and overcome issues with internal control
Why is gaining an understanding required? - Answer -Identify types of potential
misstatements
Pinpoint factors that impact risk of material misstatement
Design tests of controls and substantive procedures
