Auditing Principles & Procedures Flashcards
7 cards from real CPA 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
Which sampling method gives every item in a population an equal chance of selection?
Answer: Simple random sampling
Simple random sampling ensures each item has an equal and independent probability of being selected from the population.
An auditor discovers a material misstatement after issuing an unmodified opinion. The auditor should first:
Answer: Notify the client and determine if the financial statements need revision
Per AU-C 560, the auditor must notify management and those charged with governance to assess whether the financial statements need to be revised.
Which type of analytical procedure compares current-year account balances to prior-year balances?
Answer: Trend analysis
Trend analysis involves comparing financial data over multiple periods to identify unusual fluctuations or patterns.
The concept of 'audit risk' is best described as the risk that:
Answer: The auditor expresses an inappropriate opinion on materially misstated statements
Audit risk is the risk that the auditor issues an unmodified (clean) opinion when the financial statements are actually materially misstated.
When an auditor lacks independence, which report should be issued?
Answer: No report should be issued and the engagement must be withdrawn
A lack of independence is a scope limitation so fundamental that the auditor must withdraw from the engagement rather than issue any form of opinion.
Which of the following is an example of a substantive analytical procedure?
Answer: Recalculating depreciation expense and comparing it to the prior year
A substantive analytical procedure involves evaluating plausibility of financial data by comparing it to expectations, such as recalculating and comparing depreciation.
Under PCAOB standards, integrated audits require the auditor to opine on:
Answer: Both financial statements and internal control over financial reporting
PCAOB AS 2201 requires auditors of public companies to issue opinions on both the financial statements and the effectiveness of ICFR.