Auditing Flashcards
What is an audit?
An independent check on reported financial statements.
What is an auditing assertion?
Indications that information is complete, accurate, properly prepared etc.
What is the purpose of an audit?
To enhance the degree of confidence of users of the financial statements.
What is important for the ethical standards of auditors?
Integrity, objectivity, independence
Statements are free from material misstatement
Uses professional judgement.
What is audit risk?
Risk that the auditor will express an inappropriate audit opinion
How does audit risk arise?
Because auditors don’t test every transaction, there’s a certain amount of audit risk throughout
In the audit process, what happens in the control testing stage?
Systems will be thoroughly recorded
In the audit process, what happens in the substantive testing stage?
Detailed test of individual transactions that have been highlighted through statistical techniques.
In the audit process, what happens in the opinion formulation stage?
Involves determining whether the financial statements show a true and fair view of the entity’s financial performance and position.
What is an audit report?
An audit opinion is provided in an audit report. Included with a company’s financial statements.
What is an unmodified/unqualified audit report?
An audit with a positive opinion
What is a modified audit report?
When auditors found that those statements are not prepared and presented in accordance with accounting framework.
What is the expectations gap?
Gap between the public’s perception of the auditors role and the actual role undertaken by the auditor.
What do auditors claim an audit provides?
An opinion that at best provides reasonable assurance that the financial statements are free from material misstatement.
