CH4-7 Review by Marc-Andre Frenette https://padlet.com/frenette1/5dnf6x3hwgt7ax6 SLC students design their own exam questions and answer them... en-us 2023-02-06 13:07:07 UTC 2026-01-03 04:03:40 UTC hello@padlet.com https://padlet.net/icons/png/1f981.png When is the public accountant associated with the financial statements? (2 ways) https://padlet.com/frenette1/5dnf6x3hwgt7ax6/wish/2470071889 2023-02-06 13:42:51 UTC https://padlet.com/frenette1/5dnf6x3hwgt7ax6/wish/2470071889 What are the three levels of assurances? https://padlet.com/frenette1/5dnf6x3hwgt7ax6/wish/2470074190 ANS: First is positive assurance, second is the middle level known as limited assurance (moderate or negative assurance), and finally, the lowest level is the no assurance engagement. ]]> 2023-02-06 13:44:02 UTC https://padlet.com/frenette1/5dnf6x3hwgt7ax6/wish/2470074190 What is negative assurance and when is it permitted? https://padlet.com/frenette1/5dnf6x3hwgt7ax6/wish/2470075205 When an auditor believes certain facts to be accurate because he no evidence of the contrary can  be found. It is not permitted in reviews of audited financial statements because it is too weak of a conclusions, but it is allowed in reports on unaudited financial statements.]]> 2023-02-06 13:44:40 UTC https://padlet.com/frenette1/5dnf6x3hwgt7ax6/wish/2470075205 How can associations arise? https://padlet.com/frenette1/5dnf6x3hwgt7ax6/wish/2470075985 Through some action, the PA associates himself or herself with information issued by the enterprise.

Without the PA’s knowledge or consent, the enterprise indicates that the PA was involved with information issued by it.

 A third party assumes the PA is involved with information issued by an enterprise.

- Noah]]> 2023-02-06 13:45:07 UTC https://padlet.com/frenette1/5dnf6x3hwgt7ax6/wish/2470075985 When a new audit client is accepted, what must be obtained from the client? https://padlet.com/frenette1/5dnf6x3hwgt7ax6/wish/2470079155 ANS: An engagement letter forms the contract for the audit, every year a new letter must be obtained for the new year. ]]> 2023-02-06 13:47:01 UTC https://padlet.com/frenette1/5dnf6x3hwgt7ax6/wish/2470079155 What does materiality refer to? https://padlet.com/frenette1/5dnf6x3hwgt7ax6/wish/2470079528 ANS: Materiality refers to a monetary amount the auditors believe financial statement users would find significant to their decision-making.]]> 2023-02-06 13:47:16 UTC https://padlet.com/frenette1/5dnf6x3hwgt7ax6/wish/2470079528 What is the risk assessment process? https://padlet.com/frenette1/5dnf6x3hwgt7ax6/wish/2470080349 Answer: the risk assessment process is how management identifies risks related to misstatements in the financial statements. (Marion)]]> 2023-02-06 13:47:48 UTC https://padlet.com/frenette1/5dnf6x3hwgt7ax6/wish/2470080349 What is the difference between assurance and accounting credibility? https://padlet.com/frenette1/5dnf6x3hwgt7ax6/wish/2470080492 Assurance is the process of analyzing and used in the assessment of accounting entries and financial records. It is a process of verifying the records available in the company’s accounting record as per accounting standard and principle, and it also verifies that the accounting record is accurate or not. Accounting credibility includes the use of correct account titles and format in the financial statements, but there is no verification of the accuracy of the underlying accounting records. ]]> 2023-02-06 13:47:54 UTC https://padlet.com/frenette1/5dnf6x3hwgt7ax6/wish/2470080492 What are the 3 steps in the financial statements audit process? https://padlet.com/frenette1/5dnf6x3hwgt7ax6/wish/2470080518 2023-02-06 13:47:54 UTC https://padlet.com/frenette1/5dnf6x3hwgt7ax6/wish/2470080518 What are the three steps of the audit process? https://padlet.com/frenette1/5dnf6x3hwgt7ax6/wish/2470082055 1. Risk assessment 
2. Response to assessed risks
3. Concluding and reporting 

- Noah]]> 2023-02-06 13:48:47 UTC https://padlet.com/frenette1/5dnf6x3hwgt7ax6/wish/2470082055 The auditor assesses a business risk as high when: https://padlet.com/frenette1/5dnf6x3hwgt7ax6/wish/2470083443 it is likely and significant]]> 2023-02-06 13:49:35 UTC https://padlet.com/frenette1/5dnf6x3hwgt7ax6/wish/2470083443 What can be found in an independent auditor's report on financial statements and when is it issued? https://padlet.com/frenette1/5dnf6x3hwgt7ax6/wish/2470084492 ANS: An independent auditor's report gives an opinion on a company's financial statements, stating if they are accurate and follow accounting standards. The report is issued after the auditor's examination of financial records.
Yann, Mattias, Justin

]]> 2023-02-06 13:50:18 UTC https://padlet.com/frenette1/5dnf6x3hwgt7ax6/wish/2470084492 What is a detection risk? https://padlet.com/frenette1/5dnf6x3hwgt7ax6/wish/2470085411 ANS: Is the probability that the auditor's procedures will fail to detect a misstatement that has occurred and has not been corrected by the internal control team. ]]> 2023-02-06 13:50:54 UTC https://padlet.com/frenette1/5dnf6x3hwgt7ax6/wish/2470085411 What questions can analyzing business risk help an auditor answer? https://padlet.com/frenette1/5dnf6x3hwgt7ax6/wish/2470086192 What is the entity’s strategy? How does it generate revenues and profits?

 Does the strategy appear to be successful now and for the future?

What are the business risks/threats that can prevent the entity from achieving its strategic goals? 

What business processes, internal controls, and information systems does the entity management use to manage these risks?

What risks can affect the financial statements? 

- Noah]]> 2023-02-06 13:51:23 UTC https://padlet.com/frenette1/5dnf6x3hwgt7ax6/wish/2470086192 What is the difference between frauds and errors? https://padlet.com/frenette1/5dnf6x3hwgt7ax6/wish/2470088576 Answer: Frauds are intentional acts by one or more individuals involving the use of deception to obtain an unjust or illegal advantage. Errors are unintentional misstatements or omissions of amounts or disclosures in financial statements. (Marion)]]> 2023-02-06 13:52:55 UTC https://padlet.com/frenette1/5dnf6x3hwgt7ax6/wish/2470088576 What is fraud auditing? https://padlet.com/frenette1/5dnf6x3hwgt7ax6/wish/2470088835 It is a proactive approach to detect financial frauds using accounting records and information, analytical relationships, and awareness of fraud perpetration and concealment schemes.]]> 2023-02-06 13:53:05 UTC https://padlet.com/frenette1/5dnf6x3hwgt7ax6/wish/2470088835 What are the 4 company-level controls? https://padlet.com/frenette1/5dnf6x3hwgt7ax6/wish/2470088864 1. Control environment
2. Management's risk assessment process
3. Information and communication
4. Monitoring

- Noah]]> 2023-02-06 13:53:06 UTC https://padlet.com/frenette1/5dnf6x3hwgt7ax6/wish/2470088864 Define the concept of planning materiality. https://padlet.com/frenette1/5dnf6x3hwgt7ax6/wish/2470089038 ANS: Planning materiality refers to a wrong amount set by the auditors during the audit's planning stage based on the materiality to financial statements. ]]> 2023-02-06 13:53:13 UTC https://padlet.com/frenette1/5dnf6x3hwgt7ax6/wish/2470089038 What is the purpose of a time budget in conducting an audit engagement? https://padlet.com/frenette1/5dnf6x3hwgt7ax6/wish/2470090551 Time budgets are useful tools for scheduling the various parts of an audit engagement and for optimal assigning of personnel to these activities.

]]> 2023-02-06 13:54:02 UTC https://padlet.com/frenette1/5dnf6x3hwgt7ax6/wish/2470090551 What are the five major assertions of the audit process? https://padlet.com/frenette1/5dnf6x3hwgt7ax6/wish/2470091796 ANS: Existence, completeness, ownership, valuation, and presentation.]]> 2023-02-06 13:54:46 UTC https://padlet.com/frenette1/5dnf6x3hwgt7ax6/wish/2470091796 In your own words, define control activities in auditing. https://padlet.com/frenette1/5dnf6x3hwgt7ax6/wish/2470093312 ANS: Controls are policies and procedures that ensure the achievement of the entity’s goals, including financial reporting goals.]]> 2023-02-06 13:55:28 UTC https://padlet.com/frenette1/5dnf6x3hwgt7ax6/wish/2470093312 What is the purpose of management’s internal control structure? https://padlet.com/frenette1/5dnf6x3hwgt7ax6/wish/2470095180 The objective of management’s application control procedures is to process transactions correctly. Correctly processed transactions produce accurate account balances and help produce reliable assertions in the financial statements. 
-Arianne]]> 2023-02-06 13:56:30 UTC https://padlet.com/frenette1/5dnf6x3hwgt7ax6/wish/2470095180 Give some examples of accounting schemes for earnings manipulation and describe the auditor’s responsibilities relating to fraud. https://padlet.com/frenette1/5dnf6x3hwgt7ax6/wish/2470098062 ANS: Earnings may be manipulated by recording revenues before they are earned, by creating fictitious revenue, by boosting profits with non-recurring transactions, by shifting current expenses to a later period, failing to record or disclose liabilities, by shifting current income to another period and by shifting future expense to an earlier period. When auditors suspect fraud, they shall evaluate whether unusual relationships that were identified indicated risks of material misstatement because of fraud. 
 
]]> 2023-02-06 13:58:06 UTC https://padlet.com/frenette1/5dnf6x3hwgt7ax6/wish/2470098062 What does it mean when an auditor evaluates the risk of incorrect information being presented? https://padlet.com/frenette1/5dnf6x3hwgt7ax6/wish/2470101208 When an auditor evaluates the risk of incorrect information being presented, it means they are checking the accuracy of the information provided and determining the possibility of it being inaccurate or misleading.]]> 2023-02-06 13:59:45 UTC https://padlet.com/frenette1/5dnf6x3hwgt7ax6/wish/2470101208 What are the three elements of the fraud triangle? https://padlet.com/frenette1/5dnf6x3hwgt7ax6/wish/2470101505 Answer: Fraud incentive, fraud opportunity and fraud rationalization. (Marion)]]> 2023-02-06 13:59:55 UTC https://padlet.com/frenette1/5dnf6x3hwgt7ax6/wish/2470101505 What are the two types of fraud that auditors are mainly concerned about? https://padlet.com/frenette1/5dnf6x3hwgt7ax6/wish/2470102052 ANSWER: 
- Fraudulent financial reporting: Making false and misleading claims on financial statements.
- Misappropriation of assets: The theft or misuse of an organization's assets.

By Xavier, Nathan and Dominic]]> 2023-02-06 14:00:14 UTC https://padlet.com/frenette1/5dnf6x3hwgt7ax6/wish/2470102052 What is earnings quality and what are the indicators of high-quality earnings? https://padlet.com/frenette1/5dnf6x3hwgt7ax6/wish/2470102802 Earnings quality is the ability of the auditee to replicate the earnings, amounts and trends over long periods.

Indicators of high-quality earnings are... 
1. The consistency of accounting accruals from year to year
2. The reduction of income through accounting policy changes
3. Short time lag between income recognition and related cash being received by the business]]> 2023-02-06 14:00:42 UTC https://padlet.com/frenette1/5dnf6x3hwgt7ax6/wish/2470102802 What are the components of the audit risk model, and how are they defined? https://padlet.com/frenette1/5dnf6x3hwgt7ax6/wish/2470103763 The 3 basic components of an audit risk model are: 

1.       Control Risk: Control Risk is the probability that the auditee’s internal control policies and procedures will fail to detect or prevent material misstatements.
2.       Detection Risk: Detection risk is the risk that any material misstatement that has not been prevented or corrected by the auditee’s internal control will not be detected by the auditor.
3.       Inherent Risk: Inherent risk is the probability that material misstatements affecting one or more assertions could have occurred in transactions within the accounting system used to develop financial statements, or in an account balance.

]]> 2023-02-06 14:01:20 UTC https://padlet.com/frenette1/5dnf6x3hwgt7ax6/wish/2470103763 What are the two categories of controls and what are they? https://padlet.com/frenette1/5dnf6x3hwgt7ax6/wish/2470106409 ANS: Preventive controls and detective controls
Preventive controls are procedures designed to ensure that error or fraud does not occur in the system. 
Detective controls are procedures designed to detect any error or fraud that has occured in the accounting system.]]> 2023-02-06 14:03:01 UTC https://padlet.com/frenette1/5dnf6x3hwgt7ax6/wish/2470106409 What are the four basic accounting processes for auditing? https://padlet.com/frenette1/5dnf6x3hwgt7ax6/wish/2470106776 ANSWER:
- Revenue process: Sales activities
- Purchasing process: Purchasing goods and services
- Production process: Manufacturing and inventory costing
- Financial process: All financial activities of the firm

By Nathan, Xavier and Dominic]]> 2023-02-06 14:03:15 UTC https://padlet.com/frenette1/5dnf6x3hwgt7ax6/wish/2470106776 Define GAAS https://padlet.com/frenette1/5dnf6x3hwgt7ax6/wish/2470107285 Generally accepted auditing standards]]> 2023-02-06 14:03:28 UTC https://padlet.com/frenette1/5dnf6x3hwgt7ax6/wish/2470107285 What are monitoring controls? https://padlet.com/frenette1/5dnf6x3hwgt7ax6/wish/2470111068 It is the assessment of quality of internal control performance over time. It involves considering the design and operation while taking corrective actions if necessary to maintain efficiency of operations. ]]> 2023-02-06 14:05:43 UTC https://padlet.com/frenette1/5dnf6x3hwgt7ax6/wish/2470111068 List six main techniques used to gather audit evidence. https://padlet.com/frenette1/5dnf6x3hwgt7ax6/wish/2470111675 Inspection, Observation, Confirmation, Reperformance/recalculation, Analysis, Inquiry 
-Arianne

]]> 2023-02-06 14:06:04 UTC https://padlet.com/frenette1/5dnf6x3hwgt7ax6/wish/2470111675 What are five types of general analytical procedures https://padlet.com/frenette1/5dnf6x3hwgt7ax6/wish/2470114586 Compare current-year account balances with balances for one or more comparable periods.
Compare current-year account balances and financial relationships with similar information for the industry the company operates in.
Compare the current-year account balances with the company's anticipated results as found in the budgets and forecasts.
Evaluate the relationships of current-year account balances to other current-year balances for conformity to predictable patterns based on the company's experience.
Study the relationships of current-year account balances to relevant non-financial information.]]> 2023-02-06 14:07:54 UTC https://padlet.com/frenette1/5dnf6x3hwgt7ax6/wish/2470114586 What is the auditor’s main purpose in understanding the auditee’s internal control system? https://padlet.com/frenette1/5dnf6x3hwgt7ax6/wish/2470115143 The auditor uses the understanding of internal control to identify types of potential misstatements, consider factors that affect the risks of material misstatement, and design the nature, timing, and extent of further audit procedures.]]> 2023-02-06 14:08:16 UTC https://padlet.com/frenette1/5dnf6x3hwgt7ax6/wish/2470115143 What are levels of assurance? https://padlet.com/frenette1/5dnf6x3hwgt7ax6/wish/2470117895 The amount of credibility provided by accountants and auditors.]]> 2023-02-06 14:09:56 UTC https://padlet.com/frenette1/5dnf6x3hwgt7ax6/wish/2470117895 What important factor affects the risk of management fraud? https://padlet.com/frenette1/5dnf6x3hwgt7ax6/wish/2470126147 ANS: The lack of integrity. Integrity is the only thing that prevents fraud at the top levels of the organization. ]]> 2023-02-06 14:13:52 UTC https://padlet.com/frenette1/5dnf6x3hwgt7ax6/wish/2470126147 What is fraud opportunity? https://padlet.com/frenette1/5dnf6x3hwgt7ax6/wish/2470127498 A fraud opportunity is the ability for fraud to occur; usually arising from poor internal control, collusion, or management override of controls.]]> 2023-02-06 14:14:35 UTC https://padlet.com/frenette1/5dnf6x3hwgt7ax6/wish/2470127498 Explain the materiality levels and how the amounts are determined https://padlet.com/frenette1/5dnf6x3hwgt7ax6/wish/2470132326 Materiality is the first decision that the auditor has to take because it affects all of the other planning, reporting and examination decisions. 

In the process of planning, materiality levels are based on the knowledge of the auditor on the business' risks and experience in prior audits.]]> 2023-02-06 14:16:54 UTC https://padlet.com/frenette1/5dnf6x3hwgt7ax6/wish/2470132326 What is a positive assurance? https://padlet.com/frenette1/5dnf6x3hwgt7ax6/wish/2470133637 ANS: a positive assurance is a high, but not absolute, level of assurance.]]> 2023-02-06 14:17:40 UTC https://padlet.com/frenette1/5dnf6x3hwgt7ax6/wish/2470133637 What is negative assurance? https://padlet.com/frenette1/5dnf6x3hwgt7ax6/wish/2470141365 It is a statement that with a professional engagement states that nothing has come to the accountant’s attention that would give reason to believe that matters under consideration do not meet specified criteria.]]> 2023-02-06 14:21:50 UTC https://padlet.com/frenette1/5dnf6x3hwgt7ax6/wish/2470141365 Describe what is meant by saying that an audit under GAAS is risk based. https://padlet.com/frenette1/5dnf6x3hwgt7ax6/wish/2470146385 Management is also responsible for ensuring the company’s financial statements fairly present the business’s economic performance and financial position, both good and bad. At the preliminary stage of audit planning, the auditors will take a high-level view, based on the nature of the business and its environment, its financial strength, and its corporate governance, to make an overall assessment of the risk of material misstatement for the financial statements. This allows the auditors to focus on key risk areas that they expect to encounter and set up an overall audit strategy that sets out the main resources required to perform the audit.  ]]> 2023-02-06 14:24:48 UTC https://padlet.com/frenette1/5dnf6x3hwgt7ax6/wish/2470146385