Definitions

Question 1

Applicable Financial Reporting Framework

Answer 1

The financial reporting framework adopted by management and, where appropriate, those charged with governance in the preparation of the financial statements, or that is required by law/regulation.

Question 2

Audit Evidence

Answer 2

Information used by the auditor in arriving at the conclusions on which the auditor’s opinion is based.

Sufficiency - Quantity
Appropriateness - Quality (Relevance and reliability)

Question 3

Sufficiency of Audit Evidence

Answer 3

The measure of the quantity of audit evidence. Quantity needed is affected by the auditor’s assessment of the risks of MM and also by the quality of such audit evidence.

Question 4

Appropriateness of Audit Evidence

Answer 4

The measure of the quality of audit evidence -

Relevance and Reliability in providing support for the conclusions on which the auditor’s opinion is based.

Question 5

Audit Risk

Answer 5

The risk that the auditor expresses an inappropriate audit opinion when the FS are materially misstated.

Question 6

Audit Risk is a function of…

Answer 6

RMM & DR

Risk of material misstatement
Detection Risk

Question 7

Auditor

Answer 7

The term used to refer to the person(s) conducting the audit, usually the engagement partner or other members of the engagement team, or as applicable, the firm.

Question 8

Engagement Partner

Answer 8

the partner or other person in the firm who is responsible for the audit engagement and its performance, and for the auditor’s report that is issued on behalf of the firm, and who, where required, has the appropriate authority from a professional, legal or regulatory body. “Engagement partner” should be read as referring to a public sector equivalent where relevant.

Question 9

Detection Risk

Answer 9

The risk that procedures performed by the auditor to reduce audit risk to an acceptable low level will not detect a misstatement that exists and that could be material, either individually or in the aggregate with other misstatements.

Question 10

Financial reporting framework

Answer 10

A set of criteria used to determine measurement, recognition, presentation, and disclosure of all material items appearing in the FS. (e.g.: IFRS or a special purpose framework)

Question 11

Fair Presentation Framework

Answer 11

Used to refer to a financial reporting framework that requires compliance with the requirements of the framework AND:

1. Acknowledges explicitly/implicitly that, to achieve fair presentation of the FS, it may be necessary for management to provide disclosures beyond those specifically required by the framework
   - or-
2. Acknowledges EXPLICITLY that it may be necessary for management to depart from a requirement of the framework to achieve fair presentation (expected to be necessary only in rare circumstances)

Question 12

Financial Statements

Answer 12

A structured representation of historical financial information, including related notes, intended to communicate and entity’s economic resources or obligations at a point in time or the changes therein for a period of time in accordance with a financial reporting framework.

Question 13

FS Related Notes

Answer 13

Ordinarily comprise a summary of significant accounting policies and other explanatory information

Question 14

Historical Financial Information

Answer 14

Information expressed in financial terms in relation to a particular entity, derived primarily from that entity’s accounting system, about economic events occurring in past time periods or about economic conditions or circumstances at points in time in the past.

Question 15

Interpretive publications

Answer 15

Auditing interpretations of GAAs
Exhibits to GAAS
Auditing guidance included in AICPA Audit and Acctg Guides
AICPA Auditing Statements of Position

Question 16

Management

Answer 16

The person(s) with executive responsibility for the conduct of the entity’s operations. For some entities, management includes some or all of those charged with governance (e.g executive members of a governance board or an owner-manager)

Question 17

Other auditing publications

Answer 17

Publications other than interpretive publications:

AICPA Auditing publications not defined as interpretive
Auditing Articles in Journal of Accountancy
Other professional journals
AICPA CPA Letter
CPE Programs and other instruction materials
Texbooks
Guidebooks
Audit programs
Checklists
Other auditing publications from state CPA Societies, Other organizations, individuals

Question 18

Misstatement

Answer 18

Difference between the amount, classification, presentation, or disclosure of a reported FS items and the ACPD that is required for the item to be in accordance with the applicable financial reporting framework.

Question 19

Premise

Answer 19

Premise, relating to the responsibilities of management and, where appropriate, those charged with governance, on which an audit is conducted.

1. Prep FS
2. Unrestricted access to info
3. Fair presentation framework

Question 20

Professional Judgment

Answer 20

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.

Question 21

Professional skepticism

Answer 21

An attitude that includes a questioning mind, being alert to conditions that may indicate possible misstatement due to fraud or error, and a critical assessment of audit evidence.

Question 22

Ris of material misstatement

Answer 22

The risk that the FS are materially misstated prior to the audit.

2 Components:
Inherent Risk
Control Risk

Question 23

Inherent Risk

Answer 23

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 controls.

Question 24

Control Risk

Answer 24

The risk that a misstatement that could occur in an assertion about a class of transaction, account balance, or disclosure and that could be material, either individually or when aggregated with other misstatements, will not be prevented, or detected and corrected, on a timely basis BY THE ENTITY’S INTERNAL CONTROL.

Question 25

Those charged with governance

Answer 25

The person(s), organization(s) with responsibility for overseeing the strategic direction of the entity and the obligations related to the countability of the entity.