Auditing & Assurance Services Flashcards
7 cards from real CA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Auditing & Assurance Services flashcards as text
Which of the following best describes 'detection risk' in the audit risk model?
Answer: The risk that the auditor's procedures fail to detect a misstatement that exists
Detection risk is the risk that the auditor's substantive procedures will not detect a material misstatement that exists in an account balance or transaction class.
An auditor encounters a situation where the client restricts access to a significant class of transactions. What is the most likely audit report outcome?
Answer: Qualified opinion or disclaimer of opinion due to scope limitation
A scope limitation prevents the auditor from obtaining sufficient appropriate evidence, leading to either a qualified 'except for' opinion or a disclaimer if the limitation is pervasive.
What is 'professional skepticism' as applied in auditing?
Answer: A questioning mind and critical assessment of audit evidence without assuming honesty or dishonesty
Professional skepticism requires auditors to maintain a questioning mind and critically evaluate evidence without being presumptuous about client honesty or dishonesty.
Which engagement requires the practitioner to obtain an understanding of the subject matter and suitable criteria before performing procedures?
Answer: Both B and C
Both agreed-upon procedures and attestation engagements require the practitioner to understand the subject matter and applicable criteria, though they differ in scope and level of assurance.
Under AICPA standards, which of the following threats to auditor independence can be mitigated by a 'self-review safeguard'?
Answer: Preparation of financial statements followed by auditing them
When auditors prepare financial statements and then audit them, the self-review threat arises; firm policies separating these services can serve as a safeguard.
What is the auditor's primary objective when performing a 'cutoff' test on sales transactions?
Answer: To ensure that transactions are recorded in the correct accounting period
Cutoff tests verify that sales and related receivables are recorded in the correct period—transactions just before and after year-end are examined to detect improper timing.
Which of the following most accurately defines 'sufficient appropriate audit evidence'?
Answer: Enough relevant and reliable evidence to support the auditor's conclusions at an acceptable risk level
Sufficiency relates to quantity and appropriateness relates to quality (relevance and reliability); together they define the standard for audit evidence under professional standards.