Auditing Principles & Procedures Flashcards

In auditing a cryptocurrency exchange, which procedure is most appropriate for verifying the existence of digital assets held in custody?

Answer: Independently verifying wallet addresses on the public blockchain and reconciling to the ledger

Public blockchain verification allows auditors to independently confirm that assets at specific wallet addresses exist without relying solely on management representations.

Which standard framework is most commonly referenced when evaluating IT general controls in a US fintech audit?

Answer: COBIT (Control Objectives for Information and Related Technologies)

COBIT is the most widely adopted framework for IT governance and control objectives referenced in financial audits within the US.

A fintech auditor discovers that a key payment processing control failed for 15 days before being remediated. What is the auditor's most appropriate next step?

Answer: Assess whether transactions processed during the failure period require additional substantive testing

A control failure creates a gap that may have allowed undetected errors or fraud; auditors must perform additional substantive testing covering the period the control was inoperative.

Under SOX Section 404, management of a public fintech company must:

Answer: Assess and report on the effectiveness of internal control over financial reporting

SOX Section 404(a) requires management to assess and report on the design and operating effectiveness of ICFR as of the fiscal year-end.

Which sampling method is most appropriate when an auditor wants every transaction in a fintech dataset to have an equal probability of selection?

Answer: Simple random sampling

Simple random sampling gives each item in the population an equal and independent chance of being selected, meeting the criterion of equal probability.

Which of the following best describes 'audit trail completeness' in the context of fintech systems?

Answer: Every significant system event is recorded in an immutable, time-stamped log

A complete audit trail requires that every material action within the system is captured in a tamper-evident, chronological record to support reconstruction and investigation.

When auditing a buy-now-pay-later (BNPL) fintech, which revenue recognition risk is most significant?

Answer: Premature recognition of interest and fee income before collection is probable

BNPL companies face pressure to accelerate recognition of interest and fees; auditors must assess whether income is recognized only when collectability is probable under ASC 310.