AUE3702 Auditing Examination
⏹ Auditing. Answer: The accumulation and evaluation of evidence
about information and established criteria. Auditing should be done by a
competent, independent person.
⏹ Required for an audit: Answer: 1. Information in *verifiable* form.
2. *Criteria* by which to evaluate the information.
⏹ Evidence. Answer: Any information used by the auditor to determine
whether the information being audited is stated in accordance with
established criteria.
⏹ An auditor must be: Answer: 1. Competent to know the types and
amount of evidence to accumulate in order to reach the proper
conclusion.
2. Of independent mental attitude.
⏹ Accounting. Answer: The recording, classifying, and summarizing of
economic events in a logical manner for the purpose of providing
financial information for decision making.
⏹ Risk-free interest rate. Answer: Rate the bank could earn by investing
in US treasury notes. *Auditing has no effect on this. *
, ⏹ Business risk. Answer: Reflects the possibility that the business will
be unable to repay its loan because of economic or business conditions.
*Auditing has no effect on this risk. *
⏹ Information risk. Answer: Reflects possibility that the information
upon which the business risk decison was made was inaccurate.
*Auditing can have a significant effect on this. *
⏹ Causes of information risk: Answer: 1. Remoteness of information.
2. Biases and motives of the provider.
3. Voluminous data.
4. Complex exchange transactions.
⏹ Reducing information risk: Answer: 1. User verifies information.
2. User shares information risk with management.
3. Audited financial statements are provided.
⏹ Assurance services. Answer: Independent professional service that
improves the quality of information for decision makers.
⏹ Attestation services. Answer: Type of assurance service in which the
CPA firm issues a report about a subject matter of assertion that is made
by another party.
⏹ Auditing. Answer: The accumulation and evaluation of evidence
about information and established criteria. Auditing should be done by a
competent, independent person.
⏹ Required for an audit: Answer: 1. Information in *verifiable* form.
2. *Criteria* by which to evaluate the information.
⏹ Evidence. Answer: Any information used by the auditor to determine
whether the information being audited is stated in accordance with
established criteria.
⏹ An auditor must be: Answer: 1. Competent to know the types and
amount of evidence to accumulate in order to reach the proper
conclusion.
2. Of independent mental attitude.
⏹ Accounting. Answer: The recording, classifying, and summarizing of
economic events in a logical manner for the purpose of providing
financial information for decision making.
⏹ Risk-free interest rate. Answer: Rate the bank could earn by investing
in US treasury notes. *Auditing has no effect on this. *
, ⏹ Business risk. Answer: Reflects the possibility that the business will
be unable to repay its loan because of economic or business conditions.
*Auditing has no effect on this risk. *
⏹ Information risk. Answer: Reflects possibility that the information
upon which the business risk decison was made was inaccurate.
*Auditing can have a significant effect on this. *
⏹ Causes of information risk: Answer: 1. Remoteness of information.
2. Biases and motives of the provider.
3. Voluminous data.
4. Complex exchange transactions.
⏹ Reducing information risk: Answer: 1. User verifies information.
2. User shares information risk with management.
3. Audited financial statements are provided.
⏹ Assurance services. Answer: Independent professional service that
improves the quality of information for decision makers.
⏹ Attestation services. Answer: Type of assurance service in which the
CPA firm issues a report about a subject matter of assertion that is made
by another party.
