ACCT 4400 Exam 1 Flashcards
Exam 1 Brief Terms and Laws
Informational Asymmetry
management has more information than creditors, owners and investors
Conflict of Interest
managers may not act in the best interest of owners
Principal/Agent
Principals: Owners/ stockholders; Agent: Managers running the business
Assurance Service Examples
audits, attestation service, and others like IT consulting, installing new accounting systems, tax consulting
Audit Risk
the risk of an auditor giving a clean opinion when in fact it was not
Unqualified Opinion
Clean Audit Report
Qualified Opinion
uncertain report; there may be gray areas
Adverse Opinion
financial stmt not in accordance w/ GAAP
Disclaimer Opinion
choose to not give an opinion
Sarbanes - Oxley Act
created PCAOB; Focus on Internal Control; CEO & CFO must certify financial stmt; Auditor Independence Provision
Professional Skepticism
make sure to have a questioning mind and critical assessment of evidence
Audit Committee
setting term of engagement; hiring external auditor; setting compensation
they are independent director to audit firms
SEC
watchdog of capital market
PCAOB
watchdog of auditors; set standards to public companies
AICPA
code of conduct for accountants; sets standards to private companies