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AUD > Chapter 1: Auditing and Attestation - Engagement Acceptance and Understanding the Assignment > Flashcards

Chapter 1: Auditing and Attestation - Engagement Acceptance and Understanding the Assignment Flashcards

1
Q

CPA firms should establish policies and procedures for determining this in order to minimize the risk of being associated with a client whose management lacks integrity.

A

Acceptance of Client

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2
Q

An attempt to quantify the effects of future events that cannot be known with certainty, based on assumptions and projections.

A

Accounting Estminates

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3
Q

The principal laws and regulations used by management and those charged with governance in the preparation of the financial statements of an entity.

A

Applicable Financial Reporting Framework (AFRF)

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4
Q

Was adopted to provide guidance and rules to all members in the operation of their professional responsibilities. Members include those in public practice, government, industry, and education jobs.

A

AICPA Code of Professional Conduct

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5
Q

A set of audit procedures that examine the relationships between financial and nonfinancial data.

A

Analytical Procedures

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6
Q

The measure of the quality of audit evidence, that is, its relevance and its reliability in providing support for the conclusions on which the auditor’s opinion is based.

A

Appropriate

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7
Q

Declarations or a set of declarations about whether subject matter is based on or conforms to selected criteria (AT 101.08).

A

Assertions

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8
Q

The practitioner’s satisfaction about the reliability of an assertion being made by one party for use by other parties.

A

Assurance

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9
Q

To issue a written communication expressing a conclusion (opinion) on subject matter, or an assertion about the subject matter that is the responsibility of another party (AT 101.01).

A

Attest Engagement

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10
Q

A set of standards that provides guidance and a broad framework for a variety of attest services performed by a certified public accountant.

A

Attestation Standards

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11
Q

A periodic verification of assets, records, transactions, events, or conditions performed by a person independent of the custody or recordkeeping for the items verified.

A

Audit

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12
Q

A body formed by a company’s board of directors to oversee audit operations and circumstances.

A

Audit Committee

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13
Q

A statement about the correspondence between assertions by others (usually quantifiable information) and established criteria.

A

Audit Opinion

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14
Q

A series of specific and specialized steps or actions auditors take to meet audit objectives.

A

Audit Procedure

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15
Q

A written outline of work to be done during an audit.

A

Audit Program

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16
Q

An individual who performs auditing procedures to determine the validity and fair presentation of financial information or to provide assurance to management on the effectiveness of the organization’s governance, risk management, and/or control processes.

A

Auditor

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17
Q

A person (or firm) possessing knowledge in a particular field other than accounting or auditing.

A

Auditor’s Specialist

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18
Q

Those bodies recognized as authoritative sources of accounting standards.

A

Authoritative Bodies

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19
Q

A summary of assets, liabilities, and owner’s equity for a company as of a specific date.

A

Balance Sheet

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20
Q

The amount of net cash that was generated by an entity during an accounting period. It is the difference between total cash inflows and total cash outflows.

A

Cash Flow

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21
Q

A condition (or set of conditions) that develops from an event or a series of events, which may occur almost imperceptibly and may converge in random or unexpected ways to create situations that might otherwise not have occurred and might not have been anticipated.

A

Circumstance

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22
Q

Designed to ensure that all transactions are recorded in the correct account, charged or credited to the correct customer (or vendor), applied to the correct product line, or classified as an intercompany sale (i.e., a review of a fixed asset listing to confirm that no maintenance and repair expenditures have been capitalized).

A

Classification

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23
Q

The process of conveying ideas or messages from one person to another. In the case of electronic data processing (EDP), communication is the transfer of data from one device to another.

A

Communication

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24
Q

Represents the attainment and maintenance of a level of understanding and knowledge that enables a member to render services with facility and acumen.

A

Competence

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25
Q

A service, the objective of which is to assist management in presenting financial information in the form of financial statements without undertaking to obtain or provide any assurance that there are no material modifications that should be made to the financial statements in order for the statements to be in conformity with the applicable financial reporting framework.

A

Compilation

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26
Q

Part of the group audit engagement partner’s firm in a different location, a network firm, or another firm.

A

Component Auditor

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27
Q

Direct communication with external independent parties to prove that balances (e.g., cash balances, accounts receivable, accounts payable, notes payable) are correct.

A

Confirmation

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28
Q

The use of the same methods for the same items, either from period to period within a reporting entity or in a single period across entities.

A

Consistency

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29
Q

An organization or individual that provides consulting services generally provides advice.

A

Consulting Services

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30
Q

An event or condition that may occur in the future but that cannot currently be predicted.

A

Contingency

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31
Q

The risk that a material misstatement that could occur in an assertion about a class of transaction, account balance, or disclosure will not be prevented or detected and corrected on a timely basis by the entity’s internal control.

A

Control Risk

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32
Q

Evidence, other than the books of original entry (i.e., the accounting records), which allows the auditor to reach conclusions.

A

Corroborating Evidence

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33
Q

An individual elected or appointed to the board of directors of a corporation.

A

Director

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34
Q

An expression of no opinion. (AU-C 700.03)

A

Disclaimer of Opinion

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35
Q

Indicating clearly in the audit report, in the introductory and opinion paragraphs, the portion of the audit covered by the other independent auditor(s).

A

Division of Responsibility

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36
Q

In computing, the instructions for operators, descriptions of procedures, and other descriptive material about a program or a system.

In systems analysis, the preparation and production of documents for system analysis, programming, and system operation.

In auditing, the use of documentary evidence to support or substantiate a claim or opinion

A

Documentation

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37
Q

A situation wherein the practitioner renders professional services.

A

Engagement

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38
Q

A letter written by the CPA to the client that represents the contractual understanding between the CPA and the client of the work to be performed, signed by both the CPA and the client.

A

Engagement Letter

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39
Q

The requirement of the auditor to obtain sufficient appropriate audit evidence to provide a reasonable basis for an opinion on financial statements.

A

Evidence

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40
Q

A method of providing information to external users, which is useful in making business and economic decisions.

A

Financial Reporting

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41
Q

The principal means of communicating financial information to those users external to the entity.

A

Financial Statements

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42
Q

A graphic depiction, using uniform symbols to show the control flow, primary actions, and interrelationships of a task or a set of tasks.

A

Flowchart

43
Q

It gives the entity’s expected future position and results of operations based on expected conditions and expected courses of action.

A

Forecast

44
Q

The intentional misrepresentation or failure to disclose a material fact or facts that results in injury or loss to someone relying on it.

A

Fraud

45
Q

Basic accounting principles and standards and specific conventions, rules, and regulations that define accepted accounting practice at a particular time by incorporation of consensus and substantial authoritative support.

A

Generally Accepted Accounting Principles (GAAP)

46
Q

The Statements on Auditing Standards issued by the Auditing Standards Board (ASB), the senior committee of the AICPA designated to issue pronouncements on auditing matter for nonissuers.

A

Generally Accepted Auditing Standards (GAAS)

47
Q

The body authorized to promulgate standards of financial accounting and reporting for governmental units.

A

Government Accounting Standards Board (GASB)

48
Q

A business entity that is expected to continue in operation indefinitely.

A

Going Concern

49
Q

These are audit standards that must be followed for audits of federal organizations, programs, activities, functions, and funds received by contractors, nonprofit organizations, and other external organizations.

A

Government Auditing Standards

50
Q

To be free from conflicts of interest and bias, self-governing, impartial, not subject to control by others, not requiring or relying on something else, not contingent, and acting with integrity and objectivity (i.e., with judgment that is unimpaired and without bias or prejudice).

A

Independence

51
Q

The susceptibility of an assertion about a class of transaction, account balance, or disclosure to a misstatement that could be material, either individually or when aggregated with other misstatements, before consideration of any related controls.

A

Inherent Risk

52
Q

The seeking of appropriate information from knowledgeable persons inside (both management and staff) or outside the entity (e.g., bankers, attorneys, vendors, customers, predecessor auditor) with the approval of management.

A

Inquiry

53
Q

An audit of internal control over financial reporting being integrated with the audit of financial statements.

A

Integrated Audit

54
Q

An unimpaired condition or firm adherence to a code of ethics or moral values.

A

Integrity

55
Q

Must include consideration of relevant systems, records, personnel, and physical properties, including those under the control of third parties.

A

Internal Audit Scope

56
Q

A process, effected by an entity’s board of directors, management and other personnel, which is designed to provide reasonable assurance regarding the achievement of objectives in one or more categories:

Effectiveness and efficiency of operations
Reliability of financial information
Compliance with applicable laws and regulations

A

Internal Control

57
Q

The comfort letter provides “negative assurance” to the underwriters that “nothing came to our attention which would indicate that the information does not meet the specified standard.”

A

Letter for Underwriters

58
Q

A statement that “there are no material modifications that should be made to the financial statements in order for the statements to be in conformity with the applicable financial reporting framework.”

A

Limited Assurance

59
Q

a suit that is contested in court. It is a legal action

A

Litigation

60
Q

written representation from management which affirms (AU-C 580):

the fair presentation of the financial statements and management’s responsibility for them,
the completeness of all information provided to the auditor and in the financial statements,
representations relating to recognition, measurement, and disclosure (including the absence of knowledge of fraud or suspected fraud), and
information concerning subsequent events.

A

Management Representation Letter

61
Q

an entity-specific aspect of relevance based on the nature or magnitude or both of the items to which the information relates in the context of an individual entity’s financial report

A

Materiality

62
Q

an untrue statement that misrepresents the facts and which, by its magnitude or nature, influences the decision making of the user

A

Materially Misstated

63
Q

a reported amount that is over (overstated) or under (understated) the actual amount

A

Misstatement

64
Q

a written description of the internal control structure of the auditee

A

Narrative

65
Q

the type of audit procedure to be used, whether a class of transactions is tested by analytical procedures, tests of controls or substantive testing through confirmation, recalculation, examination of documents (tracing and vouching), reperformance, etc

A

Nature

66
Q

describes violations of laws or governmental regulations perpetrated by the entity or by the management or employees acting on behalf of the entity

A

Noncompliance with Laws and Regulations by Client

67
Q

all entities except for those defined as issuers

A

Nonissuer

68
Q

an accounting method used for nonprofit organizations that utilizes the fund structure

A

Nonprofit Accounting

69
Q

distinguished from a business entity by three characteristics: contribution of significant resources from providers who do not expect proportionate return, operating purposes other than to provide goods or services for profit, and absence of ownership interests like business enterprises.

A

Not-for-Profit

70
Q

remaining impartial in judgments in order to get more quality information

A

Objectivity

71
Q

It prescribes the specific policies, procedures, and guidelines to implement the Single Audit Act of 1984 and the Single Audit Act Amendments of 1996, 2003, 2007, and 2013.

A

OMB Circular A-133

72
Q

the computation of the net difference between the income earned and expenses incurred in operating a trade or business

A

Operating Income/Loss

73
Q

he physical count of inventory taken by the client at year-end (i.e., on the last day of the fiscal year) to obtain evidence regarding existence and completeness

A

Physical Inventory

74
Q

an auditor who was previously the auditor of an entity and who has resigned or been replaced by another auditor

A

Predecessor Auditor

75
Q

the auditor responsible for the greater portion of financial statements

A

Principal Auditor

76
Q

the professional conduct or skill expected of one rendering professional services

A

Professional Competence

77
Q

“the application of relevant training, knowledge, and experience, within the context provided by auditing, accounting, and ethical standards, in making informed decisions about the courses of action that are appropriate in the circumstances of the audit engagement.”

A

Professional Judgment

78
Q

performed to determine if the projected objectives established by a legislative body for a particular program have been achieved

A

Program Audits

79
Q

consists of financial estimates of future events that may be a forecast (the entity’s expected future position and results of operations based on expected conditions and expected courses of action) or a projection (based on hypothetical assumptions).

A

rospective Financial Information

80
Q

states that except for the effects of the matter to which the qualification relates, the financial statements present fairly, in all material respects, the financial position, results of operations, and cash flow in accordance with accounting standards generally accepted in the United States or an applicable financial reporting framework

A

Qualified Opinion

81
Q

a CPA firm’s system of specified standards that are required to be developed to assure that firm is in compliance with professional standards for the services it provides

A

Quality Control Standards

82
Q

the degree of assurance to convince a “reasonable man” within the cost-benefit constraint

A

Reasonable Assurance

83
Q

management, owners, family members of owners or management, affiliates, or any party which “can significantly influence the management or operating policies” such that the entity might be “prevented from fully pursuing its separate interests.”

A

Related Parties (Financial Statements)

84
Q

an engagement undertaken to achieve, through the performance of inquiry and analytical procedures, limited assurance that there are no material modifications that should be made to the statements in order for them to be in conformity with GAAP or, if applicable, with a comprehensive basis of accounting other than generally accepted accounting principles

A

Review

85
Q

a systematic process of evaluating the potential risks that are involved in an audit or attestation engagement

A

Risk Assessment

86
Q

the combination of inherent risk (IR) and control risk (CR) for an entity

A

Risk of Material Misstatement (RMM)

87
Q

provide the detail and guidance needed to meet the 10 GAAS standards

A

Statements on Auditing Standards (SAS)

88
Q

a restriction on an audit that is caused by the client, issues beyond the control of the client, or other events that do not allow the auditor to complete all aspects of his or her audit procedures

A

Scope Limitation

89
Q

To achieve adequate internal control in a business enterprise, the primary functions of the business should be identified. The duties of these functions should be outlined and control procedures designed to achieve adequate internal control. In designing control procedures, the duties involved in accomplishing these functions should be separated as much as possible to attain control

A

Segregation (or Separation) of Duties

90
Q

deficiencies which are considered significant to the design and operation of the internal control structure should be reported to those charged with governance

A

Significant Deficiency

91
Q

requires state and local governments and not-for-profit organizations that expend total federal financial assistance equal to or in excess of $750,000 in a fiscal year to have an audit performed in accordance with the Act (as implemented by OMB Circular A-133)

A

Single Audit Act Amendment of 2013

92
Q

a person (or firm) possessing knowledge in a particular field other than accounting or auditing

A

Specialist

93
Q

standards concerning the accounting (compilation) and review services rendered in connection with unaudited financial statements or other unaudited financial information of an entity that is not required to file financial statements with a regulatory agency

A

Statements on Standards for Accounting and Review Services (SSARS)

94
Q

states that the financial statements present fairly, in all material respects, the entity’s financial position, results of operations, and cash flows in accordance with accounting principles generally accepted in the United States of America

A

Standard Auditor’s Report

95
Q

the owner of a share of the corporation’s common or preferred stock

A

Stockholder

96
Q

an event occurring after the balance sheet date but prior to the issuance of the auditor’s report, which has a material effect on the financial statements and therefore requires adjustment or disclosure in the statements. (AU-C 560)

A

Subsequent Event

97
Q

corporation controlled, directly or indirectly, by another (parent) corporation where the control is usually by ownership of a majority (greater than 50%) of the outstanding voting stock

A

Subsidiary

98
Q

tests of transaction details and account balances and analytical procedures performed to detect material misstatements in the account balances, transaction class, and disclosure components of the financial statements

A

Substantive Procedures

99
Q

an auditor who replaces the previous auditor

A

Successor Auditor

100
Q

the formal education and subsequent experience an auditor must have to perform an adequate audit

A

Technical Training and Proficiency

101
Q

provides evidence on a sample basis about the presence or absence of a control condition

A

Test of Controls

102
Q

the person(s) with responsibility for overseeing the strategic direction of the entity and obligations related to the accountability of the entity

A

Those Charged with Governance

103
Q

states that the financial statements are presented fairly in accordance with accounting principles generally accepted in the United States of America or an applicable financial reporting framework—the basic premise being that the auditor has tested the financials and they give an accurate representation of the company’s condition

A

Unmodified Opinion

104
Q

document the work done and conclusions reached by the auditor, showing procedures applied, tests performed, information obtained, and pertinent conclusions reached (AU-C 230)

A

Workpapers

AUD (7 decks)

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