Lesson 1-6 Review Quiz

This is a structured report of historical financial information, including related disclosures, intended to communicate an entity’s economic resources or obligations at a point in time or the changes therein for a period in accordance with a financial reporting framework.

• Annual Report

• Financial Statements

• Trial Balance

• Director's Report

When is a misstatement considered material?

• All misstatements are important and thus should be identified.

• If the misstatement is above the auditor’s summary of audit differences.

• If the misstatement could influence the decisions of the users of the financial statements.

• If the misstatement resulted from disagreement between management and the auditors.

At EY, what is our acceptable threshold of audit risk?

• 5%

• 3%

• 1%

• 10%

This is the risk that our procedures to reduce audit risk to an acceptably low level will not detect a misstatement that exists and that could be material, either individually or when aggregated with other misstatements. This is the only risk that auditors can control.

• Inherent Risk

• Control Risk

• Detection Risk

• Audit Risk

This is the vehicle we use, at EY, to convert the requirements of the International Standards on Auditing (ISAs) into our proprietary methodology for use on all EY audits around the world.

• EY Atlas

• EY Knowledge

• EY Canvas

• EY GAM

Which of the following is an expected roll of an associate? (select all that apply.)

• Participate directly in the performance of audit procedures

• Prepare the relevant workpapers to evidence the work performed

• Communicate to other members of the audit team, as appropriate, matters that warrant their attention

• Perform a detailed review of the audit work, including all of the workpapers in high risk or other sensitive audit areas

TE is 4,500. There is a financial statement line item of inventory that has a balance of 3,000. Is inventory a significant account?

• Yes, because inventory is always a significant account

• No, because it is less than TE

• Maybe, because there may be a risk that makes it a significant account even though it is less than TE

Oh no! You found an error when substantively testing an account. You consider the size of the error against _____. If the error is less than ______, the account is still free from material misstatement.

• SAD nominal amount, Tolerable Error

• SAD nominal amount, Planning Materiality

• Tolerable Error, Planning Materiality

Check all that apply. In what ways could we classify an account?

• Significant account

• Material account

• Limited risk account

• High risk account

• Insignificant account

Which of the following are both Profit and Loss and Balance Sheet Assertions? Select all that apply:

• Measurement

• Existence

• Completeness

• Valuation

• Presentation and Disclosure