Glossary Flashcards
0
Q
Engagement in which a practitioner is engaged to issue or does issue an EXAMINATION, REVIEW, or AGREED UPON PROCEDURES Report on a subject matter, or an assertion about the subject matter, that is the responsibility of another party.
A
Attest Engageements
1
Q
A ratio that measures how effectively an enterprise is using their assets:
A
Activity Ratio
2
Q
An auditors report stating “do not present fairly”
A
Adverse Opinion
3
Q
An engagement in whip a practitioner is engaged to issue a report of findings based on specific agreed upon procedures.
A
Agreed-Upon Peocedures
4
Q
An approximation of a financial statement element, item, or account used because data is either not readily available or is dependent upon the outcome of future events.
A
Accounting Estimate
5
Q
One of the three categories of financial statement assertions relating primarily to assets, liabilities, and equity interests.
A
Account Balances
6
Q
The underlying accounting data and corroborating information that must be obtained to support auditor conclusions.
A
Audit Evidence
7
Q
A listing of audit procedures necessary to accomplish the objectives of the audit; required for every audit.
A
Audit Plan
8
Q
A committee of the board of directors, generally made up of 3-5 members of the board who are “outside directors.”
A
Audit Committee
9
Q
Responsible for the selection and appointment of the independent external auditor and for reviewing the nature and scope of the engagement.
A
Audit Committee
10
Q
Goals of audit testing, developed in light of financial statement assertions.
A
Audit Objectives
11
Q
An overall plan for the audit, typically used to develop the more detailed audit plan.
A
Audit Strategy
12
Q
An engagement in which an accountant presents in the form of financial statement information that is the representation of management.
A
Compilation
13
Q
A financial statement assertion appearing in all three assertion categories and indicating that all transactions, events,assets, liabilities,mad equity interests that should have been reported have been recorded, and that all disclosure that should have been included in the financial statements have been included.
A
Completeness
14
Q
In sampling, the selection of groups of adjacent items
A
Block (cluster) sampling
15
Q
A technique in which the auditor tests the input data, processes the data independently, and then compares his or her independently determined results to the program results.
A
Auditing Around the Computer
16
Q
An open exchange of ideas; required as a means of evaluating the potential for material misstatements due to fraud.
A
Brainstorming
17
Q
What are the attributed of risk (four characteristics used in analyzing risk:)
A
Type
Significance
Likelihood
Pervasiveness
18
Q
An IT department employee who converts data into machine-readable form during the input stage (e.g. Keypunch operator).
A
Computer Operator
19
Q
An IT Department employee who develops and writes computer programs.
A
Computer Programmer
20
Q
In sampling, a measure of how certain the auditor wants to be that his or her result are accurate.
A
Confidence Level.
*Note that the confidence level plus the risk of being ineffective = 100%
21
Q
A weakness that exist when the design or operation of a control procedure does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis.
A
Control Deficiency
22
Q
The tone of the an organization including management attitudes, participation of those charged with governance, organizational stricture, and human resource policies.
A
Control Enviornment
23
Q
Evidence indicative of the sequential flow of accounting operations.
A
Audit Trail
24
A schedule that itemizes transfers of cash among banks including the record date per the client and the and the transaction date per the bank.
Bank transfer schedule
26
A schedule that compares the cash balance reported by the bank to the cash balance reported by the client and explains any differences.
Bank Reconciliation
27
A form of parallel simulation where the auditor observes an actual processing run and compares the actual results to the expected results based on the auditor's own program.
Controlled Processing
28
A form of parrallel simulation where the auditor uses a archived copy of the program in question (generally auditors controlled copy) to preprocess transactions. The results are then compared to the results from the normal processing run.
Controlled Reprocessing
29
A bank statement sent directly to the auditor, usually shortly after period end.
Cutoff Bank Statement
30
A ratio that measures security for long term creditors/investors.
Coverage Ratio.
31
An audit procedures in which the auditor uses the same transaction as both test of controls and a substantive test.
Dual Purpose Test
32
A special type of attribute sampling appropriate when the auditor believes the population deviation rate is zero or near zero.
Discovery Sampling
33
A sampling plan that uses the average difference between the audited (correct) calues of items and their book values to project the actual population value.
Difference Estimation
34
In sampling, the error rate founf in a sample used to estimate the overall error rate in the population.
Deviation Rate
35
A collection of audit documentation applicable to the year under audit.
Current File
36
A section of application program code that collects transaction data for the auditor.
Embedded Audit Module
37
A document identifying all significant audit findings and issues; required by the PCAOB standards for audits of issuers.
Engagement Completion Document
38
An auditors report stating the auditor does not express an opinion on the financial statement. "We were engaged to audit"
Disclaimer of Opinion
39
The end of the period during which the auditor assembles the final audit documentation file. After this date existing documentation must NOT BE DELETED, and additions to the workpapers MUST BE DOCUMENTED. Auditing standards define this date as ______ days after the reporty release date. PCAOB standars define this date as ______ days following the report release date.
Documentation Completion Date:
Nonissuers (Auditing Standards): Report Release Date + 60 Days
Issuers (PCAOB Standards) Report Release Date + 45 Days
40
A paragraph included in the auditors report when required by GAAS or at the auditors discretion when referring to a matter that is appropriately presented or disclosed in the financial statement and is of such importance that it is fundamental to the users unerstanding of the financial statements.
Emphasis-of-Matter Paragraph
41
A financial statement assertion in the "transactions and events" catergory indicating that transactions and events have been recorded in the proper period.
Cutoff
42
A financial statement in the "account balance" category indicating assets, liabilities, and equity interest exist.
Existence
43
An engagement that provides positive assurance (an opinion) based on procedures such as search, verification, inquiry, and analysis.
Examination
44
In sampling, the auditors best estimate of the rate of deviation from a prescribed control procedure.
Expected Deviation Rate
45
Software that is used to interrogate files, extract and analyze data, and allow performance of test directly on the client's system.
Generalized Audit Software Package (GASP)
46
A financial statement that reflects the expected financial redults of a future period based on expected conditions and expected courses of action. (General & Limited Use Allowed)
Financial Forecast
47
A financial statement that reflects the financial results of a future period based on hypothetical ("what if") assumptions. (Limited Use only)
Financial Projection
48
The set of accounting rules established by the Financial Accountng Standards Board.
Generally Accepted Accounting Principles (GAAP)
49
Qualitative standards that provide a measure of audit quality and of objectives to be achieved in an audit.
Generally Accepted Auditing Standards (GAAS)
50
Standards for audits of governement organizations, audits of governement assistance received by nongovernmental and government organizations.
Generally Accepted Government Auditing Standards (GAGAS)
51
The partner responsible for the overall quality of the engagement
Engagement Partner
52
A review that is required by the PCAOB standards that is performed by a partner who is not otherwise associated with an issuer audit engagement.
Engagement Quality Review
53
Evaluated the significant judgments made by the engagement team and the overall conclusion reached on the engagement.
Engagement Quality Reviewer
54
A written communication documenting the understanding between an accountant and his or her client.
Engagement Letter
55
A component of internal control that deals with the identification, capture, and exchange of information in a timely and useful manner, and with an understanding of individual roles and responsibilities.
Information and Communication System
56
An engagement that provides an opinion on financial statements as well as testing and reporting on compliance with the laws and regulations that authorize the spending of public funds.
Government Audit
57
Automated means of originating, processing, storing, and communicating information.
Information Technology (IT)
58
The provision that the auditor is unable to obtain absolute assurance that the financial statements are free from material misstatement because of the nature of financial reporting, the nature of audit procedures, the timliness of financial reporting, and the balance between cost and benefit.
Inherrent Limitations of an Audit
59
Auditing standards issued by the International Auditing and Assurance Standards Board (IAASB), a standard setting board of the Internation Federation of Accountants (IFAC).
Internation Standards on Auditing
60
A scheme whereby a check drawn on one bank is deposited in another bank, but the disbursement is not recorded on a timely basis, resulting in an overstatement of cash.
Kiting
61
A scheme whereby a curent receipt of cash (or a check) is stolen. To prevent detection, a subsequent receipt of cash (or a check) is applied to the previously unrecorded customer account.
Lapping
62
A sampling plan that uses the average value of the items in the sample to estimate the true population value.
Mean-Per-Unit (MPU) Estimation
63
Generally speaking, programs that expend $300,000 or more in federal financial assistance.
Major Programs (spefic guidelines are based on formulas prescribed in OMB-Circular A-133)
64
A ratio that measures a firms short term ability to maturing obligations.
Liquidity Ratio
65
Differences that arise from the judgments of management concerning accounting estimates that the auditor considers unreasonable, or the selection and application of accounting policies that the auditor considers inappropriate.
Judgmental Misstatements
66
The quality of an audit test as masured in terms of the relvance and reliability of the evidence it provides. "The ______ of an audit procedure includes both its PURPOSE & it TYPE.
Nature (of an audit test)
67
A system in which customer send their payments directly to the bank, preventing access by company employees.
Lock Box
68
A written version of a flowchart describing the auditors understanding of the system of internal control.
Narrative
69
The amount of error or omission that would affect the judgment of a reasonable person.
Materiality
70
The three types of modified opinions are:
The qualified opinion, adverse opinion, and disclaimer of opinion.
71
A deficiency, or comination of deficiencies, in internal control, such that there is a reasonable posibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis.
Material Weakness
72
A statement indicating that, as a result of performing certain procedures, nothing came to the accountants attention idicating that the subject matter in question did not meet a specified standard.
Negative Assurance
73
A confirmation in which a response is requested only if the amount stated is incorrect.
Negative Confirmations
74
In sampling, an approximation of the true balance of an account, determined by applying the projected misstatements to the recorded balance.
Point Estimate
75
In sampling, an allowance for sampling risk that is added to a point estimate to provide a range within which the true population value is expected to fall.
Precision Interval
76
A confirmation in which the recipient is requested to respond regardless of whether the information included (if any) is accurate.
Positive Confirmation
77
A method sampling in which auditor use their judgment (rather than mathmatical formulae) to estimate risk, determine sample size, and estimate risk.
Nonstatistical Sampling
78
Examples of nonsampling risk include:
Selecting inappropriate audit procedures, or failing to recognize a misstatement in documents examined.
79
A measure of the extent to which controls achienve their stated goals; evaluated by using test of controls to test how, by whom, and with what level of consistency control policies and procedures have been applied.
Operating Effectiveness of Controls
80
A technique by which the auditor reprocesses some or all of the client's live data (using the auditor's own software) and then compare the results with the clent's files.
Parallel Simulation
81
A paragrapgh included in the auditor's report when required by GAAS or at the auditor's discretion that refers to matters other than those presented or disclosed in the financial statements that are relevant to the users understanding of the audit, the auditors responsibilities or the auditor's report.
Other-Matter Paragraph
82
Members of the board of directors who are neither employees nor part of the management and who do not have a material financial interest in the company.
Outside Directors
83
A range of engagements with specific governing standars from the yellow book that may embrace one of three objectives: Effectiveness, Economy, Efficiency; Internal Control; or Compliance.
Performance Audits
84
An auditor's report stating that "except for" the effects of the matter(s) to which the qualification relates, the financial statements are presented fairly, in all material respect.
Qualified Opinion
85
Financial statements used to demonstrate the effect of a proposed transaction or event by showing how it might have affected the historical financial statements, if it has occurred during the perid covered by those statements.
Pro-Forma Financial Statements
86
Sampling technique in which the sampling unit is defined as an individual dollar in a population. Once a dollar is selected, the entire account (containing that dollar) is audited.
Probability-Proportionate-to-Size (PPS) Sampling
87
A governmental audit used in situation when no overall opinion is rendered on the financial statements.
Program-Specific Audit
88
Must follow specialized rules designed for the particular type of program involved.
Program-Specific Audit
89
Financial statements that attempt to reflect a company's expexted financial position and expected results of operations.
Prospective Financial Statements (Financial Projection & Financial Forecast)
90
In sampling, an estimate of the total error in a population, determined by findinf the error in a sample and adding an adjustment for sampling risk.
Projected Misstatement
91
A firms quality control system is composed of five elements:
1. Acceptance & Continuance of Clients and Engagements
2. Independence, Integrity & Objectivity
3. Monitoring
4. Personnel Management
5. Engagement Performance
92
A system designed to ensure that services are completely delivered and adequately supervised.
Quality Control System
93
A sampling plan that uses the ratio of the auditing (correct) values of items to their book values, to project the true population value.
Ratio Estimation
94
A sample selected in such a way that every item in the sample has an equal chance of being included in the sample.
Random Sample
95
Controls designed to elimate or reduce to an acceptably low level threats to independence.
Safeguards
96
A report on the design and implementation of a service organizations controls. It does not provide assurance on the operating effectiveness of controls.
"Type 1 Report" - Report on Management's Description of the Service Organization's System and the Suitability of the Design of Controls
97
A report on the design, implementation, and operating effectiveness or a service organization's controls.
"Type 2 Report" - Report on Management's Description of the Service Organization's System and the Suitability of the Design and Operating Effectiveness of Controls
98
A report that is issued subsequent to the date f the original report, but which bears the same date as the original report, indicating that no additional work has been performed since that date.
Reissued Report
99
Related Parties include a reprting entity's:
Affiliates, principal owners, and management; also any members of their immediate families.
100
The period for which audit documentation must be kept. Auditing standards define this period as _____ years from the report release date; PCAOB standars define it as _____ years from the report release date.
1. Auditing Standards (nonissuers) = Five years from the report release date
2. PCAOB Standards (issuers) = Seven years from the report release date
101
The date on which the auditor grants the client permission to use the report
Report Release Date
102
An engagement in which an accountant performs inquiry and analytical procedures as a basis for providing limited assurance that there are no material modifications that should be made to the financial statements in order for them to be in conformity with generally accepted accounting principles.
Review
103
An entity's identification and analysis of the risks to the acheivement of its objectives.
Risk Assessment (oerformed by the entity)
104
The process by which an auditor obtains an understanding of an entity and its enviornment, including its internal control, in order to evaluate the liklihood of a material misstatement.
Risk Assessment (performed by the auditor)
105
An audit of entities expending federal assistance and has two main components: An audit of an entity's financial statements and separate schedule of expenditures if federal awards, and a compliance audit of major federal awards.
Single Audit
106
A federal act requiring entities that expend federal assistance equal to or in excess of $500,000 anually, to have a program-specific, or entity-wide audit that complies with the act.
Single Audit Act
107
A deficiency, or combination of deficiencies, in internal control, that is less severe than a material weakness, yet important enough to merrit the attention by those charged with governance.
Significant Deficiency
108
In PPS sampling, the range of dollars from which each sampling unit will be selected. (e.g. in a population of $500,000 with a sampling interval of $5,000, there would be 100 sampling intervals; the sample would consist of 100 items, with one item being selected from each of the 100 intervals),
Sampling Interval
109
In sampling, the item selected from the population for testing.
Sampling Unit
110
The susceptibility of the financial statements to error.
Risk of Material Misstatement (comprised of inherent risk and control risk)
111
Audit procedures that aid the auditor in identifying obligations that hsould have been recorded at the balance sheet date, but were not.
Search for Unrecorded Liabilities
112
A governmental commision given the authority to set guiudelines for publicly traded companies.
SEC
113
A puplication of the U.S government Accountability Office (GAO), entitles "Governemtn Auditing Standards," which represents the source of GAGAS.
Yellow Book
114
A mathmatical measure of population variability
Standard Deviation
115
A financial reporting framework other than GAAP that is one of the following basis of accounting: cash basis, tax basis, regulatory basis, contractual basis, or any other basis of accounting that uses a definite set of logical, reasonable, criteria that is applied to all material items appearing in the financial statements.
Special Purpose
116
Standards issued by the Auditing Standards Board (ASB) of the AICPA
Statements on Auditing Standards (SAS)
117
In sampling, the separation of the total population into several relatively homogeneous groups, with each group then treated as a separate population.
Stratification
118
In sampling, a method designed to avoid oversampling for attributes by allowing the auditor to stop an audit test before completing all steps, if the results have become clear.
Stop-or-Go Sampling (Sequential Sampling)
119
Standards established by the AICPA to regulate the porvision of services to privately held companies not seeking audited statements.
Statements on Standards for Accounting and Review Services (SSARS)
120
A metho of sampling in which auditors use mathematical formulae (rather than simply using judgment) to quantify risk, determine sample size, and evaluate sample results.
Statistical Sampling
121
The threat that an audit organization's placement within a government entity, in combination with the structure of the government entity being audited, will impact the audit organization's ability to perform work and report result objectively.
Structural Threat
122
An engagement that provides assurance on the realibility of a defined electronic system.
SysTrust Engagement
123
In sampling, a method of sample selection whereby every nth item in a population is chosen as part of the sample.
Systematic Selection
124
In sampling, the sum of the sample deviation rate and the allowance for sampling risk.
Upper (Maximum) Deviation Rate
125
An amount and type of audit evidence that is considered adequate to support an opinion on the financial statements.
Sufficient (Sufficiency of Audit Evidence)
126
The threat that external influences or pressures will impact and auditor's ability to make independent and objective judgments.
Undue Influence Threat
127
Those who bear responsibility to oversee the obligations and strategic direction of an entity.
Those Charged with Governance
128
Standards issued by senior technical bodies of the AICPA regarting attest engagements which includes:
Statements on Standards for Attestation Engagements (SSAE):
1. Agreed-Upon Procedures
2. Financial Forecasts and Projections
3. Pro Forma Financial Statements
4. Internal Control Over Fiancial Reporting
5. Compliance
6. Management's Discussion & Analysis (MD&A)
129
An engagement in which a client's website is assessed for predefined criteria that are designed to measure transaction integrity, information protection, and disclosure of business practices.
WebTrust Engagement
130
A technique used by the auditor to electronically mark specific transaction and follow them through the client's system.
Transaction Tagging
131
The process of tracing transactions relevant to financial reporting through the accounting system from inception through recording in the general eldger and presentatio in the financial statements.
Walkthroughs
132
A statistical sampling method used to estimate the numerical measurement of a population such as the dollar value.
Variables Sampling
133
Approach used when selecting controls to test in an integrated audit in which the auditor evaluates overall risk at the financial statement level, considers controls at the entity level, and then focuses on accounts, disclosures, and assertions for which there is a reasonable posibility of material misstatement.
Top-Down Approach
134
In sampling, the maximum rate of deviation from which a prescribed procedures that the auditor will tolerate without modifying planned reliance on internal control.
Tolerable Deviation Rate
135
A group of matched documents related to a particular purchase (includes):
Voucher Packet > Includes (requisition, purchase order, receiving report, and vendor invoice)
136
In sampling, the maximum monetary misstatement in an account balance or class or transactions that may exist without causing the financial statements to be materially misstated. It is the application of performance materiality to a particular sampling procedure.
Tolerable Misstatemetnt > based on preliminary assessment of materiality
137
An auditor's report stating that the financial statements are presented fairly in all material respects in accordance with the applicable fiancial reporting framework.
Unmodified Opinion
138
Audit tests used to obtain evidence about the operating effectiveness of a control by determining how, by whom, and with what level of consistency control have been applied.
Tests of Control
139
Test of Controls include:
1. Inquiry
2. Inspection
3. Observation
4. Reperformance
140
Performed when the auditor's risk assessment is based on th assumption that controls are operating effectively.
Tests of Controls
141
A restriction on the engagement that occurs when the accountant is unable to fully complete necessary procedures.
Scope Limitation
142
The threat that an auditor or an audit organization that has provided nonaudit services will not appropriately evaluate the results of previous judgments made or services performed as part of the nonaudit services when forming a judgment significant to an audit.
Self-Review Threat
143
Findings that should be included in the audit documentation because they are related to the selectiion and application of accounting principles or to possible material misstatements in the financial statements; or because they cause significant difficulty in, or indicate the need for significant revision of, necessary audit procedures; or because they may result in modification to the auditor's standard report.
Signigicant Audit Findings
144
Exists when the engagement team fails to obtain sufficient appropriate evidence, the engagement team reaches an inappropriate conclusion, or the firm is not independent of th client.
Significant Engagement Deficiency
145
The existence of a significant engagement deficiency:
Prevents the engagement quality reviewer from providing concurring of issuance.
146
The quality of being both reliable (valid, factual, objective, and supportable), and relevant (realted to the financial statement assertion under consideration).
Appropriate (Appropriateness of Audit Evidence)
147
Electronic method used to test an automated transaction processing system. Emphasis is placed on the input and processing stages of transaction processing.
Computer Assisted Auditing Techniques (CAAT)
