Audit & Attestation Services Flashcards
7 cards from real ABA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Audit & Attestation Services flashcards as text
Which component of the internal control framework addresses the entity's values, ethics, and operating style?
Answer: Control environment
The control environment sets the tone of the organization and is the foundation for all other components of internal control.
A review engagement provides what level of assurance compared to an audit?
Answer: Limited (negative) assurance rather than reasonable (positive) assurance
A review provides limited assurance expressed as negative assurance ('nothing came to our attention'), while an audit provides reasonable positive assurance.
Which audit procedure involves independently verifying account balances by contacting third parties directly?
Answer: Confirmation
Confirmation is the process of obtaining a direct written response from a third party, such as confirming accounts receivable balances with customers.
What is the primary purpose of a management representation letter in an audit?
Answer: To document management's acknowledgment of its responsibility for the financial statements
A management representation letter documents that management acknowledges its responsibility for the financial statements and provides written representations to the auditor.
Under GAAS, an auditor is required to communicate 'significant deficiencies' in internal control to:
Answer: Those charged with governance in writing
GAAS requires auditors to communicate significant deficiencies and material weaknesses to those charged with governance in writing.
Inherent risk is best defined as the susceptibility of an assertion to:
Answer: Material misstatement assuming no related internal controls
Inherent risk is the susceptibility of an assertion to material misstatement before considering any related internal controls.
Which of the following is an example of a substantive analytical procedure?
Answer: Comparing current-year interest expense to the average loan balance multiplied by the interest rate
Substantive analytical procedures use expected relationships (like interest expense vs. loan balance × rate) to assess whether recorded amounts are reasonable.