Ch. 2 - Fundamental Concepts Flashcards

1
Q

Statutory audits - meaning

A

those required by law

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2
Q

voluntary audits - meaning

A

those not required by law

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3
Q

Agency Risk - Meaning

A

the risk that managers are not acting in the best interest of the shareholders

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4
Q

Agency Costs

A

the costs of techniques used to reduce agency risk

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5
Q

Information Risk

A

the risk that financial information presented is not reliable

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6
Q

Information Costs

A

The costs to ensure the financial information presented is accurate

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7
Q

Expectation Gap - Definition

A

The difference between what the public expects and audit to do, and what it actually does

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