Audit Midterm

systematic process of objectively obtaining and evaluating evidence regarding assertions

when a practicenter is engaged to issue a report on subject matter or an assetion that is the responsibility of another party

independnet professional services that improve the quality of information

risk that the auditor may unknowingly fail to approprialy modify their opionion on statments that are materially misstated

combination of inherent risk and control risk

risk that the auditor will not detect a material misstatement. inversly related to RMM

AR = RMM * DR or AR = (IR * CR) * DR

incentive/pressure, opportunity, attitude/rationalization

Level of materiallity for the financial statements taken as a whole. The maximum amount by which the statements could be misstated and still not affect the decisions of users.

The amount of planning materiality that is allocated to an account or class of transactions

client acceptance/establish understanding, preliminary activities, plan, audit internal controls, audit business processes, complete the audit, evaluate results and issuer report.

revenue, purchaseing, human resource management, inventory management, financing

occurrenc, completeness, authorization, accuracy, cutoff, classification

existence, right & obligations, completeness, valuation & allocation

occurrence and rights & obligations, completeness, classification & understandability, accuracy & valuation

adequate training & proficiency, maintain independence, due professional care

adequately plan & supervise, obtain sufficient understanding of the the entity & its environment, obtain sufficient appropriate evidence

state in report whether the F/S are in accordance with GAAP, identify inconsistencies, state whether disclosures are adequate, express an opinion

Results to source, occurrence

Source to results, completeness

risk assessment, test of controls, substantive analytical procedures, test of details

control environment, entity's risk assessment process, information system, control activities, monitoring

identify entity-level controls, identify significant accounts & disclosures, understand the likely sources of misstatements, select controls to test

risk of incorrect rejection, risk of under reliance, risk of assessing control risk too high, efficiency

risk of incorrect acceptance, risk of overreliance, risk of assessing control risk too low, effectiveness

sample deviation + allowance for sampling risk

number of deviations / sample size

tolerable deviation - expected deviation

upper deviation rate - actual deviation rate