Exam 1 Flashcards
Assertions
representation, explicit or otherwise, with respect to the recognition, measurement, presentation and disclosure of information in the financial statements, which are inherent in management, representing that the financial statements are prepared in accordance with the applicable financial reporting framework.
Assurance services
independent professional services that improve the quality of information for decision makers
Attest services
services provided by a practitioner engaged to issues a report on subject matter that is the responsibility of another party.
Audit Data Analytic
using analysis, modeling and visualization to discover and analyze patterns, anomalies and other information 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. It’s information to which audit procedures have been applied
Audit risk
the risk that the auditor express an inappropriate audit opinion when the financial statements are materially misstated
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 misleading
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 causes the financial statements to not be presented fairly.
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.
Risk of material misstatements
The risk that the financial statements are materially misstated prior to the audit
Unqualified 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
Audit committee
- a committee consisting of members of the board of directors, charged with overseeing the entity’s system of internal control over financial reporting, internal and external auditors and the financial reporting processes
Auditing standards of the PCSOB
statements issued by the public company accounting oversight board
Corporate governance
the oversight mechanisms in place to help ensure the proper stewardship over an entity’s assets
Independence
a state of objectivity in face and in appearance, including the absence of any significant conflicts of interest
Integrated audit
an audit of both financial statements and internal control over financial reporting, provided b the external auditor, required for public companies
Ethics
a system or code of conduct based on moral duties and obligations that indicate how we should behave
Professionalism
the conduct, aims or qualities that characterize a profession or professional person
Analytical procedures
evaluations of financial information through analysis of plausible relationships among both financial and non-financial data
Audit committee
a subcommittee of the board of directors that is responsible for the financial reporting and disclosure process
Audit data analytics
using analysis, modeling, and visualization to discover and analyze patterns, anomalies and other information in data in the context of the audit
Audit strategy
the auditor’s plan for the expected conduct, organization and staffing of the audit
Dual-purpose tests
tests of transactions that both evaluate the effectiveness of controls and detect monetary errors
Engagement letter
a letter that formalizes the contract between the auditor and entity and outlines the responsibilities of both parties
Overall materiality
the maximum amount by which the auditor believes the financial statements could be misstated and still not affect the decisions of users
Risk assessment procedures
the audit procedures designed and performed to identify and assess the risks of material misstatement, whether due to fraud or error, at the financial statement and assertion levels
Substantive procedures
audit procedures performed to test material misstatements in an account balance or disclosure component of the financial statements
Substantive tests of transactions
test to detect errors or fraud in individual transactions
Test of Details
substantive tests that concentrate on the details of items contained in the account balance and disclosure
Tolerable misstatements
The amount of the overall materiality that is used to establish a scope for the audit procedures for the individual account balance or disclosures
Transactions and events for period under audit
○ Occurrence - did it happen? In substance?
○ Completeness - is that everything? Anything missing?
○ Authorization - proper channels and approvals?
○ Accuracy - add up? Foot? Tie?
○ Cut off (time period) - Proper time period recognition?
○ Classification - COA? GAAP? IFRS? RAP? Other?
- presentation
- Account balances at period end:
○ Existences
○ Right and Obligations
○ Completeness
○ Accuracy, Valuation and Allocation
