Lesson 1-4 Review

The basic objective of an audit of financial statements is to?

• Prepare the audited financial statements in accordance with the applicable financial reporting framework.

• Test all transactions to prevent and or detect fraudulent transactions initiated by management or the entity’s employees.

• Obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement.

Professional skepticism means that when management makes a statement to you, as an auditor, you should:

• Disregard the statement because it does not represent sufficient appropriate audit evidence.

• Believe the statement to maintain the client relationship.

• Require the statement be put in writing so you can complete your audit documentation.

• Corroborate the statement with other audit evidence.

Which one of the below is an external resource available at EY to understand the client?

• Google

• Factiva

• EY GAM

• EY Knowledge CHS

What is the materiality amount at an account level referred to as?

• Planning Materiality

• Tolerable Error

• SAD Nominal Amount

• Audit Risk Percentage

Planning materiality is simply a mathematical equation and does not require significant professional judgement

• Yes

• No

For the Accounts Payable – Rights & Obligations assertion, if your inherent risk is Higher and you are taking a Rely on controls strategy, what is your Combined Risk Assessment (CRA) for the Rights & Obligations assertion?

• Mini

• Low

• Moderate

• High

What is the Executive Discussion and Approval Points?

• Critical points throughout the audit

• Subset of PIC requirements

• Meet requirements of CPE standards

• Partner approves decisions

What is the phase of the audit process that is focused on performing critical risk assessments that will shape the tasks that you will perform when you join your audit team?

• Identify and assess risks

• Conclude and communicate

• Initial planning

• Design and execute responses to risks

What are some key points to remember when you receive communications that include processes and tasks?

• Prioritize the tasks that have been given to you

• Reach out to your client if you need help prioritizing

• Address the risks before you begin audit procedures

• Understand what the tasks are to properly complete them

Which of the following statements describe a transaction?

• It is data, information, or account detail of a common nature within the financial of a business

• It is susceptible to different inherent and/or control risks

• Classified as routine, non-routine, or estimation

• Its account effect is significantly different from other transactions