Chapter 1 Notes Flashcards
auditing
the accumulation and evaluation of evidence about info to determine and report on the degree of correspondence between the info and established critieria
evidence
any info used by the auditor to determine whether the info being audited is stated in accordance with the established criteria
independent auditors
auditors reporting on company financial statements
audit report
communicates the auditors findings to users
accounting
the recording, classifying, and summarizing of economic events in a logical manner for the purpose of providing financial info for decision making
interest rate determination factors
risk free interest rate - opportunity cost
business risk for the customer - likelihood of repayment
information risk
information risk
the possibility that the info upon which the business risk decision was made was accurate
reasons for unreliable info
remoteness of info
biases and motives of the provider
voluminous data
complex exchange transactions
ways to reduce info risk
user verifies info
user shares info risk with management
audited financial statements are provided
assurance service
an independent professional service that improves the quality of info for decision makers
attestation service
a type of assurance service in which the CPA firm issues a report about a subject matter or assertion that is made by another party
Five Categories of Attestation Services
- Audit of historical financial statements
- audit of internal control over financial reporting
- Review of historical financial statements
- Attestation services on info tech
- Other attestation services that may be applied to a broad range of subject matter
audit of historical financial statements
management asserts that the statements are fairly stated in accordance with applicable U.S. or international accounting standards
audit of internal control over financial reporting
management asserts that internal controls have been developed and implemented following well established criteria
review of historical financial statements
management asserts that the statements are fairly stated in accordance with accounting standards, the same as for audits
attestation services on information technology
management makes various assertions about the reliability and security of electronic info
other attestation services
any other attestation services not previously stated
non assurance services
other management consulting, accounting and book keeping, tax services
types of cpa audits
operational audit
compliance audit
financial statement audit
operational audit
evaluate the efficiency and effectiveness of any part of an organization’s operating procedures and methods
compliance audit
conducted to determine whether the auditee is following specific procedures, rules, or regulations set by some higher authority
ex: wage rate laws, loan covenants, etc.
financial statement audit
conducted to determine whether the financial statements(info being verified) are stated in accordance with specified criteria
types of auditors
certified public accounting firms, government accountability office auditors, internal revenue agents, and internal auditors
certified public accounting firms
responsible for auditing the published historical financial statements of all publicly traded companies, other large companies, and smaller companies
government accountability office auditor
an auditor working for the US Government Accountability Office, performs audit function for Congress, and other functions
internal revenue agents
auditors who perform compliance audits for the IRS
internal auditors
employed by all types of organizations to audit for management
certified public accountant
must have certain
educational requirements
taken the CPA and passed
experience
