Chapter 1: Overview of Audit and Assurance Flashcards
Applicable Financial Reporting Framework
the financial framework selected by management to prepare the company’s financial statements.
Assurance Engagement
practitioner (auditor) engaged to issue a written conclusion on a subject matter for which a responsible party is accountable to intended users.
Assertions
statements made by management regarding the recognition, measurement, and presentation and disclosure of items in the financial statements.
Internal Control
the processes implemented and maintained by management to help entities achieve their objectives.
Materiality
maximum amount of misstatement (or omission) the auditor can tolerate and still issue a clean opinion.
Sufficient and Appropriate Evidence
relates to the quantity and quality of the evidence collected by the auditor.
Financial Statement Audit
an engagement designed to express an opinion whether the financial statements are prepared in all material respects in accordance with a financial reporting framework.
What are the two limitations of financial statement audit?
- An audit doesn’t guarantee that the financial statements are free from fraud/error.
- Judgement is required in the preparation of the financial statements.
What are the five other types of audit?
- Compliance Audit
- Performance Audit
- Comprehensive Audit
- Internal Audit
- Corporate Social Responsibility Audit
Compliance Audit
assesses an organization’s compliance with certain rules/regulations.
Performance Audit
refers to efficiency & effectiveness of an organization’s operations.
Comprehensive Audit
Combines financial statement audit, compliance audit, and performance audit.
Internal Audit
provides assurance about various aspects of an organization’s activities.
Corporate Social Responsibility Audit
includes voluntary reporting about environmental, employee, and social subject matter.
Reasonable Assurance
gathering sufficient evidence to form a positive expression of opinion regarding whether the information being assured is presented fairly.