Auditing & Assurance Flashcards
7 cards from real CGA 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 flashcards as text
Under AU-C Section 540, when auditing accounting estimates, which approach involves the auditor independently developing a point estimate to compare to management's estimate?
Answer: Auditor's independent estimate
One acceptable approach is for the auditor to develop an independent estimate and compare it to management's recorded amount to evaluate reasonableness.
Which sampling method gives every item in the population an equal probability of being selected?
Answer: Systematic sampling with a random start
Systematic sampling with a random start applies a uniform interval to the population, giving each item an equal chance of selection.
A going-concern doubt exists if substantial doubt about an entity's ability to continue is NOT alleviated. The auditor's report in this case should include:
Answer: An explanatory paragraph describing the going-concern uncertainty
When substantial going-concern doubt remains, the auditor adds an explanatory paragraph to the unmodified or modified opinion highlighting the uncertainty.
Which of the following is a key difference between fraud and error in the context of financial statement auditing?
Answer: Fraud involves intentional acts, while errors are unintentional
The distinguishing factor between fraud and error is intent: fraud is an intentional act, while an error is an unintentional misstatement.
Which of the following best describes 'tolerable misstatement' in audit sampling?
Answer: The maximum monetary misstatement acceptable without affecting the audit conclusion
Tolerable misstatement is the maximum error in the population that the auditor is willing to accept and still conclude the balance is fairly stated.
Which component of the COSO Internal Control—Integrated Framework relates to an organization's commitment to integrity and ethical values?
Answer: Control Environment
The Control Environment sets the tone at the top and includes the organization's commitment to integrity, ethical values, and competence.
When an auditor uses the work of a specialist (e.g., an actuary), the auditor should:
Answer: Evaluate the specialist's qualifications, objectivity, and the reasonableness of their findings
The auditor must assess the specialist's competence and objectivity and evaluate whether their findings are reasonable and consistent with audit evidence.