BUS 425
Auditing
Tad Miller
11/13/14
Audit Planning, Analytical Procedures, Risk, Internal Control Evaluation and Audit Plan
1. CLIENT ACCEPTANCE Before accepting a new client, what is the single most important
characteristic about the client's senior management we need to evaluate.
2. AU-C SECTION 315
State the objective of AU-C section 315.
3. COMMUNICATION WITH PREDECESSOR AUDITOR What three points do auditing
standards require the successor auditor to discuss with the predecessor auditor ?
.
4. Related Parties Describe related parties as the term is used in auditing literature.
5. ANALYTICAL PROCEDURES
Briefly describe why auditors are required to perform
analytical procedures in the planning stages of an audit.
6. ANALYTICAL PROCEDURES
7. AUDIT RISK
Briefly describe or define analytical procedures.
Write the definition of audit risk or acceptable audit risk.
8. CONTROL RISK
9. DETECTION RISK
Write the definition of control risk.
Write the definition of detection risk.
10. INTERNAL CONTROL
How does COSO define internal control
11. SARBANES OXLEY As a result of Sarbanes Oxley, the PCAOB establishes specific
reporting requirements for management regarding the company's internal control
structure. Specifically, the company's annual report must include the following (3) three
statements pertaining to internal controls.
12. SARBANES OXLEY As a result of Sarbanes Oxley, in addition to their opinion on the
financial statements, auditors of public companies must issue a second opinion. What
is the additional report auditors must now issue?
13. COMPONENTS OF INTERNAL CONTROL
List the five components of internal control.
14. SEGREGATION OF DUTIES with regard to segregation of duties, what four functional
responsibilities need to be performed by different people
15. UNDERSTANDING THE CLIENT'S ACCOUNTING SYSTEM In order to document our
understanding of the design of client’s accounting information system which includes
components of their internal controls. We need to demonstrate that we understand the
flow of transactions.
 identify significant classes of transactions
 how those transactions are
1. -.
2. - .
3.
4. –
( Initiated, authorized, recorded, processed and reported )
16. CLASSES OF SIGNIFICANT TRANSACTIONS
List the transaction cycle we have been
studying and the significant classes of transactions that comprise this transaction cycle.
17. TYPES OF DOCUMENTATION
What are the three types documentation are typically
used to document our understanding of the internal controls?
18. SIGNIFICANT DEFICIENCY / MATERIAL WEAKNESS
deficiency.
What is the definition of a significant
19. SIGNIFICANT DEFICIENCY / MATERIAL WEAKNESS
weakness.
What is the definition of a material
20. SIGNIFICANT DEFICIENCY / MATERIAL WEAKNESS If an auditor of a public company
becomes aware of either a significant deficiency of a material weakness, to whom must
it be reported.
21. MANAGEMENT ASSERTIONS During the audit, you observe an entry in the sales journal
for which there is no underlying shipping document or sales order. To which financial
statement assertion does this condition relate?
22. MANAGEMENT ASSERTIONS As you reviewed invoices for sales transactions you
observe several invoices where the price on the invoice is higher than the price on the
official price list. To which financial statement assertion does this condition relate?
23. MANAGEMENT ASSERTIONS You observe a customer order and a shipping document
indicating the goods were shipped to the customer but the transaction was not
recorded in the sales journal. To which financial statement assertion does this condition
relate?
24. MANAGEMENT ASSERTIONS While auditing accounts receivable, you become
concerned that the client’s footnotes do not include the required disclosures concerning
the concentration of risks. Although the risks are significant and the amounts are
material the client does not have a footnote discussing these matters as required by
ASC 275. To which financial statement assertion does this condition relate?
25. AUDIT RISK MODEL If we want to assess control risk as high what does that imply
about the effectiveness of their internal controls?
26. AUDIT RISK MODEL SEC CLIENT SUBJECT TO SARBANES OXLEY We have obtained a
sufficient understanding of the client's internal controls and have properly documented
that understanding. We believe the client's controls are effective and we preliminarily
assess control risk as LOW.
Discuss

Which audit approach will you use?

the extent of Testing Controls you will perform ?

briefly explain why you will or will not perform any tests of controls.

the extent of Substantive Tests you will perform ?
27. AUDIT RISK MODEL SEC CLIENT SUBJECT TO SARBANES OXLEY We have obtained a
sufficient understanding of the client's internal controls and properly documented that
understanding. We DO NOT believe the client's controls are effective and we
preliminarily assess control risk as HIGH.
Discuss

Which audit approach will you use?

the extent of Testing Controls you will perform ?

briefly explain why you will or will not perform any tests of controls.

the extent of Substantive Testing you will perform ?
28. AUDIT RISK MODEL PRIVATE CLIENT NOT SUBJECT TO SEC (SARBANES OXLEY) We
have obtained a sufficient understanding of the client's internal controls and properly
documented that understanding. We believe the client's controls are effective and we
preliminarily assess control risk as LOW
Discuss

Which audit approach will you take (please consider cost in your discussion)

the extent of Test of Controls you will perform

briefly explain why you will or will not perform any tests of controls.

the extent of Substantive Testing you will perform
29. Referring to the previous problem. Explain what actions you would take if you detected
material misstatements while performing substantive tests.
NOT related to the previous problem
30. ASSET ACCOUNTS
Over
Under
Complete Exist
Trace
Vouch
Are we most concerned about overstatement or understatement ?
Are we most concerned about completeness or existence ?
Will we trace from the supporting documents to the Gen Ledger
or vouch from the Gen. Ledger to the supporting documents ?
31. EXPENSE ACCOUNTS
Over
Under
Complete Occur
Trace
Vouch
With regard to a typical asset account as of Dec. 31, 2014.
With regard to a typical expense account for the year
Are we most concerned about overstatement or understatement ?
Are we most concerned about completeness or occurrence ?
Will we trace from the supporting documents to the Gen Ledger
or vouch from the Gen. Ledger to the supporting documents ?