Chapter 1 Flashcards
is an engagement where a practitioner is engaged to issue a written report and concludes on a subject matter for which the accountable party is responsible.
assurance engagement
a prerequisite for an assurance engagement is the existence of an ________, where one party is answerable to another for the subject matter
accountability relationship
The financial framework chosen by management to prepare a company’s financial statements. For example, an applicable framework for a reporting issuer would be International Financial Reporting Standards (IFRS). An applicable framework for a private enterprise could be Accounting Standards for Private Enterprises (ASPE), or it could be IFRS.
applicable financial reporting framework
Statements made by management regarding the recognition, measurement, and presentation and disclosure of items in the financial statements.
assertions
Information used by the auditor to support the audit opinion.
audit evidence
The file where the evidence and documentation of the work performed is kept as a permanent record to support the opinion issued.
audit file
The list or description of audit procedures to be performed.
audit plan
The risk that the auditor may express an inappropriate opinion. This means the auditor may indicate that the financial statements are not materially misstated when in fact they are.
audit risk
A structured representation of historical financial information, including the related notes.
financial statements
The auditor’s formal expression of opinion on whether the financial statements are in accordance with the applicable financial reporting framework.
independent auditor’s report
The processes implemented and maintained by management to help the entity achieve its objectives.
internal control
An amount or disclosure that is significant enough to make a difference to a user. For example, if a company reports a profit of $100,000 and the auditor finds an error resulting in an overstatement of net income by $10, this probably wouldn’t affect an investor’s decision. However, if the auditor finds an error overstating revenue by $50,000 or 50 percent of the profit, this likely would affect the user’s decision and would therefore be considered material. The concept of materiality is one of the reasons why an audit never provides 100 percent assurance.
materiality
The quantity (sufficiency) and quality (appropriateness) of the evidence collected by the auditor.
sufficient and appropriate evidence
The auditor concludes that the financial statements are fairly presented.
unmodified opinion
Paper or electronic documentation of the audit created by the audit team as evidence of the work completed.
working papers
an entity whose shares, stock, or debt are listed on a stock exchange
listed entities
the consistent and faithful application of accounting standards when preparing the financial statements
Fair presentation
an audit to determine whether the entity has conformed with regulations, rules, or processes
compliance audit
an assessment of the economy, efficiency, and effectiveness of an organization’s operations
operational audits
an audit that encompasses a range of audit and audit-related activities, such as a financial statement audit, operational audit, and compliance audit
comprehensive audit
an independent service within an entity that generally evaluates and improves risk management, internal control procedures, and elements of the governance process
internal audit
non-audit firms that provide assurance services on non-financial information, such as corporate social responsibility and environmental disclosures
consulting firms
assurance that provides high but not absolute assurance on the reliability of the subject matter
Reasonable assurance
assurance that provides negative assurance on the reliability of the subject matter
Moderate assurance
