Auditing Standards Flashcards

Under AS 2201, what is the auditor's primary objective when auditing internal control over financial reporting?

Answer: To express an opinion on the effectiveness of ICFR

AS 2201 requires the auditor to express an opinion on whether ICFR is effective based on identified control criteria.

Which risk assessment procedure involves the auditor physically examining assets, documents, or records?

Answer: Inspection

Inspection involves physically examining records, documents, or tangible assets to gather audit evidence.

The concept of 'professional skepticism' in auditing requires the auditor to:

Answer: Maintain a questioning mind and critically assess evidence

Professional skepticism means maintaining a questioning mind and critically evaluating evidence without assuming either honesty or dishonesty.

Which of the following best describes 'audit risk'?

Answer: The risk that the financial statements contain a material misstatement that the auditor fails to detect

Audit risk is the risk that the auditor issues an unmodified opinion on materially misstated financial statements.

When an auditor identifies a significant deficiency in internal controls, the auditor is required to:

Answer: Communicate the deficiency in writing to management and those charged with governance

AU-C Section 265 requires written communication of significant deficiencies to management and those charged with governance.

Which sampling method gives every item in the population an equal and independent chance of selection?

Answer: Random sampling

Random sampling ensures each population item has an equal probability of selection, supporting statistical inference.

The 'going concern' assumption is threatened when:

Answer: There is substantial doubt about the entity's ability to continue operations for the next 12 months

AU-C 570 requires evaluation of whether substantial doubt exists about the entity's ability to continue as a going concern for 12 months after the financial statement date.