Auditing Principles & Procedures 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 Principles & Procedures flashcards as text
Which sampling method gives every item in a population an equal chance of being selected?
Answer: Simple random sampling
Simple random sampling ensures every item has an equal and independent probability of selection, eliminating bias.
An auditor discovers that a client's bank reconciliation contains a fictitious deposit recorded two days before year-end that was reversed in January. This is most likely an indicator of:
Answer: Window dressing
Window dressing involves manipulating financial records near period-end to make the financial position appear better than it is.
Under ISA 265, significant deficiencies in internal control must be communicated to:
Answer: Management and those charged with governance
ISA 265 requires significant deficiencies to be communicated in writing to both management and those charged with governance.
The auditor's responsibility for detecting material misstatements due to fraud is addressed primarily by:
Answer: ISA 240
ISA 240 'The Auditor's Responsibilities Relating to Fraud in an Audit of Financial Statements' is the primary standard addressing fraud detection.
When performing substantive analytical procedures, an auditor should develop an independent expectation that is:
Answer: Precise enough to detect a material misstatement
The independent expectation must be sufficiently precise to detect a material misstatement if one exists, making the procedure effective.
Which of the following best describes the concept of 'professional skepticism' in auditing?
Answer: Questioning mindset with critical assessment of evidence
Professional skepticism is a questioning mindset that critically assesses audit evidence without assuming management is either honest or dishonest.
An auditor uses negative confirmation requests when:
Answer: The audit population consists of a large number of small balances
Negative confirmations are appropriate when the population consists of many small balances and the risk of material misstatement is low.