The risk that audit evidence for a segment will fail to detect misstatements exceeding tolerable misstatement
What is Planned Detection Risk
100
AAR= 5% IR= 40% CR= 60% PDR= ?
PDR is 21%
100
Set preliminary judgment about materiality
What is Step 1 in applying materiality.
100
The tracing of selected transactions through the accounting system to determine that controls are in place
What is Walkthrough
100
Actions, policies, and procedures that reflect the overall attitude of top managment, directors, and owners of an entity about internal control and its importance
What is Control Environment
200
Measures the auditor’s assessment of the likelihood that there are material misstatements in a segment before considering the evidence of internal control.
What is Inherent Risk
200
AAR= 1% IR= 40% CR= 60% PDR= ?
PDR= 4%
200
Estimate total misstatement in segment
What is Step 3 in applying materiality
200
Audit procedures to test the operating effectiveness of controls in support of reduced assessed control risk
What is Test of Controls
200
Methods used to initiate, record, process, and report an entity's transactions and to maintain accountability for related assets.
What is Information and communication
300
Measures the auditor’s assessment of whether misstatements exceeding a tolerable amount in a segment will be prevented or detected on a timely basis by the client’s internal controls
What is Control Risk
300
AAR= 5% IR= 20% CR= 30% PDR= ?
PDR= 33.3%
300
Compare combined estimate with preliminary or revised judgment about materiality
What is Step 5 in applying materiality
300
A cooperative effort among employees to steal assets or misstate records
What is Collusion
300
Policies and procedures that management has established to meet its objectives for financial reporting
What is Control activities
400
Measure of how willing the auditor is to accept that the financial statements may be materially misstated after the audit is completed and an unqualified opinion has been issued.
What is Acceptable Audit Risk
400
AAR= 1% IR= 100% CR= 100% PDR= ?
PDR is 1%
400
Allocate preliminary judgement about materiality to segments
What is Step 2 in applying materiality
400
A letter written by the auditor to a client's management containing the auditor's recommendations for improving any aspect of the client's business
What is Management Letter
400
Management's ongoing and periodic assessment of the quality of internal control performance to determine whether controls are operating as intended and are modified when needed
What is Monitoring
500
PDR=AAR/IR*CR
What is Audit Risk Model
500
AAR= 5% IR= 60% CR= 40% PDR= ?
PDR is 21%
500
Estimate the combined misstatement
What is Step 4 of applying materiality
500
A series of questions about the controls in each audit area used as a means of indicating to the auditor aspects of internal controls
What is Internal Control Questionnaire
500
Management's identification and analysis of risks relevant to the preparation of financial statements on accordance with GAAP