Risky Business
A deficiency in internal control over financial reporting that is less severe, but important enough to merit attention.
What is a material weakness?
Sampling that attempts to approximate a random sample by selecting units without conscious bias.
What is haphazard sampling?
A cash collection from customer is stolen by an employee who takes another customer’s payment and credit’s the first customer.
What is lapping?
An attitude that includes a questioning mind & critical assessment of audit evidence.
What is professional skepticism?
An asset held by a borrower to serve as a guarantee for the value of a loan or security.
What is collateral?
Risk that procedures performed will not detect a misstatement that exists and could be material.
What is detection risk?
Taking recorded transactions and obtaining the original source documents.
What is vouching?
Intentional act involving the use of deception that results in material misstatement.
What is fraud?
Opinion expressed when f/s are presented fairly, in all material respects.
What is an unmodified opinion?
A request for the purchase of goods by an authorized department in an organization.
What is a requisition?
A deficiency in internal control over financial reporting that there is a reasonable possibility that a material misstatement will not be prevented or detected timely.
What is a significant deficiency?
Application of probability theory and statistical inference in a sample.
What is statistical sampling?
Apportions losses among all defendants who can pay, regardless of level of fault.
What is proportional liability?
Application of relevant professional knowledge/experience in order to reach a conclusion or make a decision.
What is professional judgement?
A subcommittee of the BOD responsible for audit activities.
What is an audit committee?
Susceptibility of an assertion about a class of transactions, account balance, etc. to a material misstatement before related controls are considered.
What is inherent risk?
Sampling that attempts to approximate a random sample by selecting units without conscious bias.
What is haphazard sampling?
Making transactions from one bank account to another near year-end to record the same cash twice.
What is kiting?
Opinion expressed when f/s are not presented fairly, in accordance with GAAP.
What is an adverse opinion?
Contract between bond issuer and bondholder stating time period of repayment, interest paid, etc.
What is a bond indenture?
Assumes that the company will continue long enough to carry out its objectives and committments.
What is going concern?
Taking original source documents and ensuring transactions have been recorded.
What is tracing?
Making a sale but not recording it, so it can be stolen.
What is skimming?
When the auditor does not express an opinion on the f/s.
What is disclaimer of opinion?
Restrictions in debt agreements aimed at protecting the lender by restricting borrower activities.
What are debt covenants?