Audit Basics
What is the main goal of an audit?
Ensure financial statements are free from material misstatement.
What does “materiality” mean in auditing?
Importance of an item that could influence decisions
Who is called a “whistleblower”?
Someone reporting fraud or misconduct
What is the term for a market trend where prices are generally falling?
Bear market
Which famous scientist developed the theory of general relativity?
Einstein
Name two types of auditors.
Internal and external auditors
Name the three types of materiality.
Quantitative, qualitative, circumstance-based
What is the difference between fraud and error?
Fraud is intentional; error is unintentional
What type of financial instrument represents a loan made by an investor to a borrower?
Bond
Which country consumes the most chocolate per capita?
Switzerland
What is independence in auditing?
Auditor must be unbiased and objective
What is the difference between inherent risk and control risk?
Inherent risk exists naturally; control risk exists if controls fail.
An accounts clerk records a $50,000 sale twice due to confusion over invoices. Is this a fraud or a mistake?
Mistake
Which organization in the US regulates and enforces laws for securities trading to protect investors?
SEC (Securities and Exchange Commission)
Who scored the “Hand of God” goal in the 1986 FIFA World Cup?
Diego Maradona
Who sets the International Standards on Auditing (ISA)?
IAASB – International Auditing and Assurance Standards Board.
If a $1,000 error in a $10 million financial statement changes no ratios or trends, which type of materiality might still consider it significant?
Qualitative
What type of fraud occurs when an employee manipulates financial reports to hide losses or inflate profits?
Financial statement fraud
Which market mechanism allows traders to bet on the future direction of stock prices without owning the underlying asset?
Derivatives
Which football club is nicknamed “The Red Devils”?
Manchester United
Which concept requires auditors to gather sufficient and appropriate evidence before forming an opinion on financial statements?
Audit evidence
When a seemingly minor misstatement is intentionally ignored by management, potentially misleading users, what is this called in auditing?
Management override
Which principle requires auditors to consider the possibility of intentional misstatement even if controls appear strong?
Professional skepticism
What is the term for the practice of simultaneously buying and selling related financial instruments to exploit price differences across markets?
Arbitrage
Which house’s motto in Game od Thrones is: “Unbowed, Unbent, Unbroken”?
House Martell