Fundamental Concepts Flashcards
Define an assurance engagement
an engagement in which a practitioner aims to obtain sufficient appropriate evidence in order to express a conclusion designed to enhance the degree of confidence of the intended users other than the responsible party about the outcome of the measurement/evaluation of an underlying matter against criteria.
Types of assurance
Types of assurance
Reasonable - audit
- expresses an opinion
Limited - review
- conclusion is negative assurance - nothing has come to my attention that there is an issue
- no opinion
No assurance - NTR
agency risk
risk that company mgmt may act in a way that isn’t in the best interests of the s/h
agency costs
costs associated with reducing agency risk, such as the external audit or providing mgmt bonuses which align their interests with s/h interests
Expectations gap
Gaps b/w the outcomes delivered by the asssurance engagemnet and the expectations of the users
Ways to reduce gap:
- Engagement letter
statutory audit
audit required by law - publicly traded companies required to be audited
voluntary audit
- company chooses to have an audit.
involves the collection and inspection of evidence to determine whether an organization has adhered to applicable rules, policies, procedures, laws, and regulatory guidelines
Compliance audit
involves the collection and inspection of evidence to determine the effectiveness, efficiency, and economy of an organization’s operations
Operational audit
most commonly occurs in the public sector and embraces the following aspects of public sector accountability: financial reporting, compliance with authorities, and the economical, efficient, and effective management of public funds
Comprehensive audits
provides independent assurance that an entity’s governance, internal control, and risk mgmt processes are operating effectively
Internal audit
