WGU D251 - Advanced Auditing Exam Questions With 100% Correct Answers | Verified | Latest Update 2024/2025 (GRADED)

An error, either intentional or unintentional, that exists in a transaction or financial statement account balance. alternative procedures - Correct Answer-Procedures used to obtain evidence about the existence and valuation of accounts receivable when a positive confirmation is not returned, including examining cash collected after the confirmation date and vouching unpaid invoices to customers' orders, sales orders, shipping documents, and sales invoices. Altman Z-scores - Correct Answer-A series of ratios that have predictive power in indicating the likelihood of bankruptcy. This score is named for the person who first introduced the concept and associated measurement. attribute - Correct Answer-A characteristic of the population of interest to the auditor. Attributes sampling - Correct Answer-A statistical sampling method used to estimate the rate of control procedure failures based on selecting one sample and performing the appropriate audit procedure. Audit Risk - Correct Answer-The risk that the auditor expresses an inappropriate audit opinion when the financial statements are materially misstated. Audit Risk Model - Correct Answer-Audit Risk = Inherent Risk X Control Risk X Detention Risk audit risk model - Correct Answer-A conceptual depiction of the relationship between inherent risk, control risk, detection risk, and audit risk. Audit sampling - Correct Answer-The application of an audit procedure to less than 100% of the items within an account balance or class of transactions for the purpose of evaluating some characteristic of the balance or class. audit scope - Correct Answer-The range of accounts and transactions that the auditor evaluates, along with the amount of evidence that they gather, assessments of which accounts and transactions are material, as well as the critical areas where the auditor employed significant assumptions and made associated professional judgments. WGU D251 - Advanced Auditing Exam Questions With 100% Correct Answers | Verified | Latest Update 2024/2025 | 26 Pages auditor business risk - Correct Answer-This risk reflects the potential for loss to the auditor that the client poses, including being a publicly traded client, not being a profitable engagement, damaging the auditor's reputation, and/or potential litigation relating to the engagement. auditor-detected misstatements - Correct Answer-Such a misstatement occurs when, during the audit, the auditor comes to find that there exists an error in the recording of a particular transaction, regardless of whether it was intentional or unintentional. automated purchasing system - Correct Answer-A networked software system that links a company's website to other vendors whose offerings and prices have been preapproved by appropriate management. Basic precision - Correct Answer-The amount of uncertainty associated with testing only a part of the population (sampling risk). Basic precision is calculated as the sampling interval multiplied by a confidence factor. big data - Correct Answer-High volume, high velocity, and/or high variety information assets that require new forms of processing to enable enhanced decision making, insight discovery, and process optimization. Block sampling - Correct Answer-A sampling technique that involves selecting a sample that consists of contiguous population items, such as selecting transactions by day or week. brainstorming - Correct Answer-A group discussion designed to encourage auditors to creatively assess client risks, particularly those relevant to the possible existence of fraud in the organization. business intelligence - Correct Answer-The process of transforming all of the raw data that companies (providers) collect from their various operations into actionable information. busy season - Correct Answer-An error, either intentional or unintentional, that exists An intensive time of the year during which the auditor faces the greatest deadline pressure and work volume based upon the need to provide assurance over the client's financial reports. Client business risks - Correct Answer-Risks affecting the business operations and potential outcomes of an organization's activities. Collectibility - Correct Answer-The risk that the seller will be unable to collect the entitled contractual consideration from the customer. component - Correct Answer-An entity or business activity for which group or component management prepares financial information that is required by the applicable financial reporting framework to be included in the group financial statements. component auditor - Correct Answer-An auditor who performs work on the financial information of a component that will be used as audit evidence for the group audit. A component auditor may be part of the group engagement partner's firm, a network firm of the group engagement partner's firm, or another firm. concurring partner review - Correct Answer-A review at the end of each audit conducted by an experienced auditor, usually a partner, who was not a part of the audit team, but who has appropriate competence, independence, integrity, and objectivity. The purpose of this review is to help make sure that the audit and audit documentation are complete and support the audit opinion on the financial statements and, for public companies, on the client's internal controls. Control Risk - Correct Answer-The risk that a misstatement that could occur in an assertion about a class of transaction, account balance, or disclosure and that could be material, either individually or when aggregated with other misstatements, will not be prevented, or detected and corrected, on a timely basis by the entity's internal control. corruption perception index - Correct Answer-A ranking put forth by Transparency International that ranks countries according to the extent to which people believe corruption exists; the ranking includes about 200 countries and ranks them on a scale from 0 to 10 (0 5 high corruption; 10 5 low corruption). critical audit matter - Correct Answer-Any matter that was communicated or required to be communicated to the audit committee, relating to accounts or disclosures material to the financial statements, and involving especially challenging, subjective, or complex auditor judgment. Cycle counts - Correct Answer-Periodic testing of the accuracy of the perpetual inventory record by counting all inventories on a cyclical basis. Data analytics tools - Correct Answer-Qualitative and quantitative techniques and processes that auditors use to enhance their productivity and effectiveness; auditors extract, categorize, identify and analyze patterns or trends in the data; data analytics tools vary according to organizational requirements. Detection Risk - Correct Answer-The risk that the procedures performed by the auditor 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. emphasis-of-matter paragraph - Correct Answer-A paragraph included in the auditor's report that is required by GAAS, or is included at the auditor's discretion, and that refers to a matter appropriately presented or disclosed in the financial statements that, in the auditor's professional judgment, is of such importance that it is fundamental to users' understanding of the financial statements. engagement quality review - Correct Answer-A review at the end of each audit conducted by an experienced auditor, usually a partner, who was not a part of the audit team, but who has appropriate competence, independence, integrity, and objectivity. The purpose of this review is to help make sure that the audit and audit documentation are complete and support the audit opinion on the financial statements and, for public companies, on the client's internal controls. engagement risk - Correct Answer-This risk reflects the potential for loss to the auditor that the client poses, including being a publicly traded client, not being a profitable engagement, damaging the auditor's reputation, and/or potential litigation relating to the engagement. exceptions - Correct Answer-Differences between a customer's records and the client's records reported on positive or negative confirmations. expected failure rate - Correct Answer-An anticipation of the deviation rate in the entire population. Also referred to as the expected failure rate. expected misstatement - Correct Answer-The level of misstatement that the auditor expects to detect, and it is based on projected misstatements in prior-year audits, results of other substantive tests, professional judgment, and knowledge of changes in personnel and the accounting system. expected population deviation rate - Correct Answer-An anticipation of the deviation rate in the entire population. Also referred to as the expected failure rate. extent of risk response - Correct Answer-The risk that the procedures performed by the auditor 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. Factual misstatements - Correct Answer-Misstatements that have been specifically identified and about which there is no doubt. Also referred to as known misstatements. false confirmation - Correct Answer-A situation in which the respondent to a confirmation request (in this chapter, an accounts receivable confirmation) responds inaccurately to the audit firm with respect to the information on the confirmation. Ghost employee fraud - Correct Answer-A ghost employee is a fake employee who has never worked for the organization, or a former employee who was never terminated from the payroll system and is still being paid. going-concern assumption - Correct Answer-An accounting guideline which assumes that the company will continue on long enough to carry out its objectives and commitments. In other words, there is belief that the company will not liquidate in the near future. group - Correct Answer-All the components whose financial information is included in the group financial statements. A group always has more than one component. group audit - Correct Answer-The audit of group financial statements. group audit opinion - Correct Answer-The audit opinion on the group financial statements. group engagement partner - Correct Answer-The partner or other person in the firm who is responsible for the group audit engagement and its performance, and for the auditor's report on the group financial statements that is issued on behalf of the firm. group financial statements - Correct Answer-Financial statements that include the financial information of more than one component. The term group financial statements also refers to combined financial statements aggregating the financial information prepared by components that have no parent but are under common control. Haphazard sampling - Correct Answer-A nonstatistical sample selection method that attempts to approximate a random selection by selecting sampling units without any conscious bias, or special reason for including or omitting certain items from the sample. Incremental allowance for sampling risk - Correct Answer-An increase in the total estimated misstatement caused by the statistical properties of misstatements detected in the lower stratum. Individually important locations - Correct Answer-Locations that are financially significant to the client's financial statements overall. Inherent Risk - Correct Answer-The susceptibility of an assertion about a class of transaction, account balance, or disclosure to a misstatement that could be material, either individually or when aggregated with other misstatements, before consideration of any related controls. Inventories - Correct Answer-Items of tangible personal property that are held for sale in the ordinary course of business, that are in the process of production for such sale, or that are to be currently consumed in the production of goods or services to be available for sale. Inventory shrinkage - Correct Answer-Reduction in inventory presumed to be due to physical loss or theft. EMAIL ME: For help with report, Assignment, Essay and thesis writing key audit matter - Correct Answer-A matters that, in the auditor's professional judgment, was of most significance in the audit of the financial statements of the current period. Key audit matters are selected from matters communicated to those charged with governance. key performance indicators - Correct Answer-Quantifiable measures that decision makers can use to evaluate the success of an organization, unit, employee, or account as they seek to meet performance objectives. known misstatements - Correct Answer-Misstatements that have been specifically identified and about which there is no doubt. Also referred to as known misstatements. lapping - Correct Answer-A technique used to cover up the embezzlement of cash whereby a cash collection from one customer is stolen by an employee who takes another customer's payment and credits the first customer. This process continues, and at any point in time at least one customer's account is overstated. likely misstatements - Correct Answer-The best estimate of the actual amount of dollar misstatements in the population based on projecting the sample results to the population. The projected misstatement is calculated as the sampling interval multiplied by the tainting percentage. Also see likely misstatement or most likely misstatement. logical units - Correct Answer-The balance or transaction that includes the selected dollar in a monetary unit sample. Lower-stratum - Correct Answer-Items that are not in the top stratum. management letter - Correct Answer-A letter from the auditor to the client identifying any problems and suggested solutions that may help management improve its effectiveness or efficiency. materiality - Correct Answer-The magnitude of an omission or misstatement of accounting information that, in view of surrounding circumstances, makes it probable that the judgment of a reasonable person relying on the information would have been changed or influenced by the omission or misstatement. Monetary unit sampling (MUS) - Correct Answer-A sampling method based on attributes estimation sampling but involving dollar misstatements rather than failure rates. MUS is often referred to as probability proportional to size (PPS) sampling. nature of risk response - Correct Answer-The types of audit procedures applied given the nature of the account balance and the most relevant assertions regarding that account balance. negative confirmation - Correct Answer-A request to customers asking them to respond directly to the auditor only if they disagree with the indicated balance. Noncompliance - Correct Answer-This involves acts of omission or commission by the entity, either intentional or unintentional, which are contrary to the prevailing laws or regulations. nonsampling risk - Correct Answer-The risk that the auditor reaches an erroneous conclusion for any reason not related to sampling risk. Nonstatistical sampling - Correct Answer-The application of auditor judgment and experience in a sample application to assist the auditor in determining an appropriate sample size and in evaluating the sample results. other-matter paragraph - Correct Answer-A paragraph included in the auditor's report that is required by GAAS, or is included at the auditor's discretion, and that refers to a matter other than those presented or disclosed in the financial statements that, in the auditor's professional judgment, is relevant to users' understanding of the audit, the auditor's responsibilities, or the auditor's report. overall materiality - Correct Answer-A materiality level that the auditor uses in determining whether the financial statements overall are materially correct payroll fraud - Correct Answer-A general category of fraud that includes timesheet, ghost employee, and worker misclassification frauds. performance materiality - Correct Answer-A materiality level that the auditor uses for determining significant accounts, significant locations, and audit procedures for those accounts and locations pervasive - Correct Answer-A term used in the context of misstatements to describe the effects or the possible effects on the financial statements of misstatements that are undetected due to an inability to obtain sufficient appropriate audit evidence.