Auditing Principles & Procedures Flashcards
7 cards from real CFP 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
What does 'professional skepticism' require of a fintech auditor when management provides explanations for unusual transaction patterns?
Answer: Critically evaluating explanations and seeking corroborating evidence regardless of management's credibility
Professional skepticism requires auditors to maintain a questioning mind and seek independent corroboration, not simply accept plausible explanations from management.
In the context of fintech auditing, which condition is a 'fraud risk factor' related to incentives and pressures?
Answer: Management compensation is heavily tied to short-term revenue or user growth metrics
Compensation structures tied to short-term performance targets create incentive-based fraud risk factors, as described in the fraud risk assessment triangle.
Which procedure would an auditor use to test the completeness assertion for revenue in a mobile payments company?
Answer: Vouching a sample of payment gateway records forward to recorded revenue
Vouching from source payment gateway data forward to recorded revenue tests whether all transactions that occurred were captured in the books, directly addressing completeness.
A fintech auditor finds that a key system developer also has production database write access. This represents which type of internal control weakness?
Answer: A segregation of duties deficiency
Allowing developers write access to production databases violates segregation of duties because the same person who can modify code can also directly alter live data, enabling undetected fraud or error.
Which of the following best describes the 'dual-purpose test' in fintech auditing?
Answer: Performing an audit procedure that simultaneously tests both a control's effectiveness and provides substantive evidence
A dual-purpose test is a single procedure designed to serve as both a test of controls and a substantive test, improving audit efficiency.
When evaluating the going concern assumption for a startup fintech, which factor is most relevant?
Answer: The company's cash runway relative to its current burn rate and fundraising prospects
Cash runway and burn rate directly determine whether a startup can continue operations for at least 12 months, which is the core going concern assessment horizon under AU-C 570.
Which element must be included in an audit report that contains an explanatory paragraph about a material uncertainty related to going concern?
Answer: A clear description of the principal conditions giving rise to the going concern doubt
Standards require the going concern paragraph to describe the specific events or conditions that led the auditor to conclude a material uncertainty exists, without the auditor prescribing solutions.