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
When evaluating whether to use stratified sampling, an auditor should consider:
Answer: Whether certain items have significantly higher risk or monetary value
Stratified sampling is appropriate when the population contains items of varying risk or value, allowing the auditor to apply more testing to higher-risk strata.
Management's refusal to provide a written representation letter most likely results in:
Answer: A disclaimer of opinion
Refusal to provide management representations constitutes a scope limitation so significant that it requires the auditor to disclaim an opinion.
Under ISA 720, the auditor's responsibility regarding other information in documents containing audited financial statements requires the auditor to:
Answer: Read and consider whether the other information is materially inconsistent with the financial statements
ISA 720 requires the auditor to read other information and identify material inconsistencies with the audited financial statements or misstatements of fact.
The concept of 'audit risk' is defined as the risk that:
Answer: The auditor expresses an inappropriate opinion on materially misstated financial statements
Audit risk is the risk that the auditor expresses an inappropriate (incorrect) opinion when the financial statements are materially misstated.
Which of the following best illustrates the concept of 'substantive testing'?
Answer: Reperforming a client's bank reconciliation to verify its accuracy
Reperforming the bank reconciliation directly tests the accuracy and completeness of a specific financial statement balance — a substantive procedure.
The predecessor auditor's working papers may be reviewed by the successor auditor primarily to:
Answer: Obtain information about the prior year audit findings and client relationships
Reviewing predecessor working papers helps the successor auditor obtain information about significant issues, accounting policies, and opening balances from the prior year.
Under ISA 450, misstatements that do not individually reach materiality thresholds may still require disclosure or correction when:
Answer: Their aggregate effect becomes material to the financial statements
ISA 450 requires the auditor to consider whether the aggregation of uncorrected misstatements is material, even if each individual misstatement is below the threshold.