Audit Planning & Testing Flashcards

Flashcards about Audit Planning and Testing, covering topics such as Audit Evidence, Internal Controls, and Risk Assessment.

Prevent controls

Controls applied to each transaction during normal processing intended to stop fraud or errors.

Detect controls

Controls applied after transactions have been processed to identify and rectify fraud or errors.

Entity-level controls

Implemented by businesses to reduce the risk of material misstatements in the financial statements

Transaction-level controls

Implemented to provide reasonable assurance that all transactions were recorded, actually occurred, and were accurate.

Tests of controls

Audit procedures performed to test the operating effectiveness of controls in preventing, or detecting and correcting, material misstatements.

Material weakness

A deficiency, or combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement will not be prevented or detected on a timely basis.

Significant deficiency

A deficiency, or combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention.

Authorization

Normally a transaction is authorized at the start of a transaction stream.

Executing the transaction

Involves filling the order so that title passes to a good or service.

Recording the transaction

Transactions are recorded after title passes (for goods) or services are completed and using the accrual basis.

Consideration

A transaction is completed when consideration (usually cash or electronic transfer of funds) is received or paid.