Internal Controls Risk Assessment
This includes factors, events, and conditions that could prevent the organization from achieving its business objectives.
What is business risk?
What is a client bank statement (usually sent directly to the auditor) that includes all paid checks and deposits made through a certain date, usually a specific date following the financial statement.
What is the cut-off bank statement?
This type of confirmation does not provide the balance to the recipient.
What is a blank confirmation?
This is making a statement about a population by examining only a subset.
What is sampling?
An auditor is examining this when they determine if controls would be expected to prevent or detect errors or fraud that could result in a material misstatement in the financial statements.
What is design effectiveness?
This document is used to verify the existence of deposits and outstanding loans held with a bank.
What is a standard bank confirmation?
This type of confirmation is only returned if there is a discrepancy.
What is a negative confirmation?
The risk of an incorrect conclusion for reasons unrelated to the sample itself, often due to mistakes in evaluation.
What is nonsampling risk?
This is an audit documentation that provides a visual display of the accounting system and control activities in an entity's internal control.
What is a flowchart?
This is an unintentional misstatement or omission of amounts or disclosures in financial statements.
What is an error?
This type of confirmation would be the most appropriate when RMM is high, and we think the recipient will verify the accuracy of the information.
What is a positive confirmaiton?
This is a statistical sampling method that controls for sampling risk.
What is unrestricted random selection or systematic random selection.
This is the concept that recognize that the costs of control activities should not exceed the benefits that are expected from the control activity.
This is a reconciliation in which the bank balance, the bank report of cash deposited, and the bank report of cash paid are all reconciled to the company's general ledger and cash receipts and disbursements journals.
What is proof of cash?
This is an audit procedure that simultaneously serves the substantive purpose (obtain evidence about the dollar amount in an account balance) and the test of controls purpose (obtain evidence about the company's performance of its own control activities).
What is a dual-purpose procedure?
In attribute sampling, if the upper limit rate of deviation is less than or equal to the tolerable rate of deviation, this is your decision about controls.
What is rely on controls as planned?
This process traces a transaction through the audit trail from initiation of the transaction to its inclusion in the financial statements.
What is a walkthrough?
This is the theft of a payment and the application of subsequent payments to cover the theft.
This is a fraudulent financial reporting activity by which a company recognizes a sale even though it doesn't ship merchandise to the customer, byt holds it in its own warehouse.
What is bill and hold?
This variables approach treats each dollar as the sampling unit and places emphasis on larger balances.
What is Monetary Unit Sampling, or MUS?