IFA Auditing & Assurance Flashcards

Audit sampling is used because:

Answer: Testing every transaction is often impractical or cost-prohibitive

Audit sampling allows auditors to draw conclusions about a population by testing only a portion of items when 100% testing is impractical.

What is a 'going concern' opinion?

Answer: A conclusion by auditors that the entity may not continue in operation for the foreseeable future

A going concern qualification is issued when auditors have substantial doubt about an entity's ability to continue operating for the next 12 months.

Which document outlines the terms and objectives agreed between the auditor and client before the audit begins?

Answer: Engagement letter

An engagement letter sets out the terms of the audit engagement, including scope, responsibilities, fees, and reporting timelines, agreed before work commences.

What is substantive testing in an audit?

Answer: Procedures to detect material misstatements in account balances and transactions

Substantive testing involves audit procedures designed to detect material misstatements at the assertion level in account balances, transactions, and disclosures.

What does 'audit trail' refer to?

Answer: A chronological record of transactions that can be traced from source to financial statements

An audit trail is a chronological record of all transaction steps, allowing tracing from source documents through to the final financial statements.

Which IFA ethical principle requires auditors to avoid conflicts of interest and remain objective?

Answer: Independence and objectivity

Auditors must maintain independence and objectivity, avoiding situations where personal interests or relationships could compromise their professional judgment.