Chapter 1: An Introduction to Assurance and F/S Auditing Flashcards
Assertions
Representations, explicit or otherwise, with respect to the recognition, measurement, presentation, and disclosure of information in the F/S, which are inherent in management, representing that the F/S are prepared in accordance with the applicable financial reporting framework. Assertions are used by the auditor to consider the different types of potential misstatements that may occur when identifying, assessing, and responding to the risks of material misstatement.
Assurance services
Independent professional services that improve the quality of information, or its context, for decision makers. Encompasses attest services and financial statement audits.
Attest services
Services provided by a practitioner engaged to issue a report on subject matter, or an assertion about subject matter, that is the responsibility of another party. Encompasses financial statement audits.
Audit Date Analytics.
Using analysis, modeling, and visualization to discover and analyze patterns, anomalies, and other information in data in the context of the audit.
Audit evidence
all the information used by the auditor in arriving at the conclusions on which the audit opinion is based Audit evidence is information to which audit procedures have been applied and consists of information that corroborates or contradicts assertions in the F/S.
Audit risk
the risk that the auditor expresses an inappropriate audit opinion when the F/S are materially misstated.
Auditing
a systematic process of 1. objectively obtaining and evaluating evidence regarding assertions about economic action and events to ascertain the degree of correspondence between those assertions and established criteria and 2. communicating the results to interested users.
Information asymmetry
The concept that the manager generally has more information about the true financial position and results of operations of the entity than the absentee owner does.
Information risk
The risk that information circulated by a company’s management could be false or mislead.
Materiality
The maximum amount by which the auditor believes the financial statements could be misstated and still not affect the decisions of users.
Misstatement
a departure from the applicable reporting framework that, if material, causes the financial statements to be presented fairly. Misstatements may be classified as fraud (intentional), other illegal acts such as noncompliance with laws and regulations (intentional or unintentional), and errors (unintentional)
Reasonable assurance
the concept that an audit done in accordance with auditing standards may fail to detect a material misstatement in a client’s financial statements. In an auditing context, this term has been defined to mean a high but not absolute level of assurance.
Reporting
The end product of the auditor’s work, indicating the auditing standards followed and expressing an opinion as to whether an entity’s financial statements are fairly presented
Risk of Material Misstatement (RMM)
the risk that the financial statements are materially misstated prior to the audit.
Unqualified/unmodified audit report
a “clean” audit report, indicating the auditor’s opinion that a client’s financial statements are fairly presented in accordance with agreed-upon criteria.
