Business risk is the same as audit risk.
True
False
The Strategic Systems Approach does not require the auditor to make enquiries of management.
True
False
False
Once the SSA auditor has a sound understanding of what client management's objectives, strategies and risks are, the auditor need simply audit the account balances.
True
False
False
The theory underlying business process analysis asserts that if the business process produces the output in the way that the strategy intended it to do, it is more likely that the business will achieve its objectives and not fall prey to the various risks.
True
False
True
The SSA auditor must audit all processes, including sub-processes, to be in accordance with GAAS
True
False
False
The choice of key processes to examine in detail for a SSA audit can be made by considering all of the following factors except:
a. Strategic Relevance
b. Inherent Business Risk
c. Control Environment
d. Finance and Investment Cycle
d. Finance and Investment Cycle
Inherent business risk is defined as:
a. The likelihood of a business risk occurring, ignoring the effects of the client's control environment,
b. The likelihood of a business risk occurring, considering the effects of the client's control environment,
c. The likelihood that the board of directors will override internal controls,
d. None of the above.
a. The likelihood of a business risk occurring, ignoring the effects of the client's control environment,
For each of the key business processes the auditor would learn, via interviews with management, which of the following:
a. Process objectives (the roles the process plays in achieving the entity's business objectives)
b. Process activities
c. Process Risks
d. All of the above
d. All of the above
The SSA auditor would develop and compare an independent analysis of process risks with management's analysis. If management's analysis is found to be incomplete, the auditor would:
a. Immediately issue a qualified audit opinion
b. Hold additional discussions with the Board of Directors and the Audit Committee
c. Have additional discussions with appropriate operating management, and potentially senior management
d. None of the above
c. Have additional discussions with appropriate operating management, and potentially senior management
Quality of earnings refers to:
a. The assurance the auditor has provided on the accuracy of this year's net sales figure
b. The client's ability to replicate its earnings, both in terms of the amounts and the trends over relatively long periods of time
c. The accuracy with which the cash flow forecast for the current year matches the actual sales level experienced in the same period
d. None of the above.
b. The client's ability to replicate its earnings, both in terms of the amounts and the trends over relatively long periods of time
What are the factors to consider in determining the key processes of the business?
Strategic relevance
Inherent Business Risk
Control Environment.
What is "strategic relevance" as it relates to determining the key processes of a business?
It asks how vital the process is to the strategy and objectives of the client. The more vital the process is, the more likely it is to be considered key.
What is "inherent business risk" as it relates to determining the key processes of a business?
This risk is the likelihood of a business risk occurring, ignoring the effects of the control environment. The more likely the process is to contain business risks as identified in the strategic analysis, the more likely the process will be considered "key".
What is the "Control Environment" as it relates to determining the key processes of a business?
This aspect reflects the SSA auditor's assessment of the overall attitude, awareness and commitment of management concerning the importance of control and its emphasis within the entity.
Conceptually summarize the Strategic Systems Approach to the Financial Audit by focusing on the process of risk determination through to the audit opinion provided.
The SSA audit revolves around the concept of business risk and its relationship to audit risk. The auditor documents the business risks affecting the client through strategic analysis and business process analysis. The SSA auditor then analyzes these risks, considers and tests the controls over the risks and determines what are the remaining or residual business risks. These residual risks are then analyzed for their affect on audit risk to an appropriately low level. The audit concludes with a detailed assessment of business performance to ensure that actual business performance is reflected in the financial statements in accordance with generally accepted auditing standards.
peer review:
study of a firm's quality control policies and procedures, followed by a report on a firm's quality of audit practice.
strategic systems approach to auditing (SSA audits):
an auditing approach that has a top-down focus, starting with an in-depth understanding of the auditee's business. This focus enables the auditor to understand the strategic objectives of the auditee, the risks the auditee faces in relation to these objectives and the controls necessary for the business to respond to these risks. After obtaining an understanding of the business as a whole, the SSA auditor then proceeds to look at the details of the risky transactions in the context of the knowledge gained at the broader level.
