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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

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1
Q

A ratio that measures how effectively an enterprise is using their assets:

A

Activity Ratio

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2
Q

An auditors report stating “do not present fairly”

A

Adverse Opinion

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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

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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

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5
Q

One of the three categories of financial statement assertions relating primarily to assets, liabilities, and equity interests.

A

Account Balances

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6
Q

The underlying accounting data and corroborating information that must be obtained to support auditor conclusions.

A

Audit Evidence

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7
Q

A listing of audit procedures necessary to accomplish the objectives of the audit; required for every audit.

A

Audit Plan

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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

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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

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10
Q

Goals of audit testing, developed in light of financial statement assertions.

A

Audit Objectives

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11
Q

An overall plan for the audit, typically used to develop the more detailed audit plan.

A

Audit Strategy

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12
Q

An engagement in which an accountant presents in the form of financial statement information that is the representation of management.

A

Compilation

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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

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14
Q

In sampling, the selection of groups of adjacent items

A

Block (cluster) sampling

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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

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16
Q

An open exchange of ideas; required as a means of evaluating the potential for material misstatements due to fraud.

A

Brainstorming

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17
Q

What are the attributed of risk (four characteristics used in analyzing risk:)

A

Type
Significance
Likelihood
Pervasiveness

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18
Q

An IT department employee who converts data into machine-readable form during the input stage (e.g. Keypunch operator).

A

Computer Operator

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19
Q

An IT Department employee who develops and writes computer programs.

A

Computer Programmer

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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%

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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

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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

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23
Q

Evidence indicative of the sequential flow of accounting operations.

A

Audit Trail

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24
Q

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.

A

Bank transfer schedule

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26
Q

A schedule that compares the cash balance reported by the bank to the cash balance reported by the client and explains any differences.

A

Bank Reconciliation

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27
Q

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.

A

Controlled Processing

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28
Q

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.

A

Controlled Reprocessing

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29
Q

A bank statement sent directly to the auditor, usually shortly after period end.

A

Cutoff Bank Statement

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30
Q

A ratio that measures security for long term creditors/investors.

A

Coverage Ratio.

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31
Q

An audit procedures in which the auditor uses the same transaction as both test of controls and a substantive test.

A

Dual Purpose Test

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32
Q

A special type of attribute sampling appropriate when the auditor believes the population deviation rate is zero or near zero.

A

Discovery Sampling

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33
Q

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.

A

Difference Estimation

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34
Q

In sampling, the error rate founf in a sample used to estimate the overall error rate in the population.

A

Deviation Rate

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35
Q

A collection of audit documentation applicable to the year under audit.

A

Current File

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36
Q

A section of application program code that collects transaction data for the auditor.

A

Embedded Audit Module

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37
Q

A document identifying all significant audit findings and issues; required by the PCAOB standards for audits of issuers.

A

Engagement Completion Document

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38
Q

An auditors report stating the auditor does not express an opinion on the financial statement. “We were engaged to audit”

A

Disclaimer of Opinion

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39
Q

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.

A

Documentation Completion Date:

Nonissuers (Auditing Standards): Report Release Date + 60 Days

Issuers (PCAOB Standards) Report Release Date + 45 Days

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40
Q

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.

A

Emphasis-of-Matter Paragraph

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41
Q

A financial statement assertion in the “transactions and events” catergory indicating that transactions and events have been recorded in the proper period.

A

Cutoff

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42
Q

A financial statement in the “account balance” category indicating assets, liabilities, and equity interest exist.

A

Existence

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43
Q

An engagement that provides positive assurance (an opinion) based on procedures such as search, verification, inquiry, and analysis.

A

Examination

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44
Q

In sampling, the auditors best estimate of the rate of deviation from a prescribed control procedure.

A

Expected Deviation Rate

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45
Q

Software that is used to interrogate files, extract and analyze data, and allow performance of test directly on the client’s system.

A

Generalized Audit Software Package (GASP)

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46
Q

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)

A

Financial Forecast

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47
Q

A financial statement that reflects the financial results of a future period based on hypothetical (“what if”) assumptions. (Limited Use only)

A

Financial Projection

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48
Q

The set of accounting rules established by the Financial Accountng Standards Board.

A

Generally Accepted Accounting Principles (GAAP)

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49
Q

Qualitative standards that provide a measure of audit quality and of objectives to be achieved in an audit.

A

Generally Accepted Auditing Standards (GAAS)

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50
Q

Standards for audits of governement organizations, audits of governement assistance received by nongovernmental and government organizations.

A

Generally Accepted Government Auditing Standards (GAGAS)

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51
Q

The partner responsible for the overall quality of the engagement

A

Engagement Partner

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52
Q

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.

A

Engagement Quality Review

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53
Q

Evaluated the significant judgments made by the engagement team and the overall conclusion reached on the engagement.

A

Engagement Quality Reviewer

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54
Q

A written communication documenting the understanding between an accountant and his or her client.

A

Engagement Letter

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55
Q

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.

A

Information and Communication System

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56
Q

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.

A

Government Audit

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57
Q

Automated means of originating, processing, storing, and communicating information.

A

Information Technology (IT)

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58
Q

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.

A

Inherrent Limitations of an Audit

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59
Q

Auditing standards issued by the International Auditing and Assurance Standards Board (IAASB), a standard setting board of the Internation Federation of Accountants (IFAC).

A

Internation Standards on Auditing

60
Q

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.

A

Kiting

61
Q

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.

A

Lapping

62
Q

A sampling plan that uses the average value of the items in the sample to estimate the true population value.

A

Mean-Per-Unit (MPU) Estimation

63
Q

Generally speaking, programs that expend $300,000 or more in federal financial assistance.

A

Major Programs (spefic guidelines are based on formulas prescribed in OMB-Circular A-133)

64
Q

A ratio that measures a firms short term ability to maturing obligations.

A

Liquidity Ratio

65
Q

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.

A

Judgmental Misstatements

66
Q

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.

A

Nature (of an audit test)

67
Q

A system in which customer send their payments directly to the bank, preventing access by company employees.

A

Lock Box

68
Q

A written version of a flowchart describing the auditors understanding of the system of internal control.

A

Narrative

69
Q

The amount of error or omission that would affect the judgment of a reasonable person.

A

Materiality

70
Q

The three types of modified opinions are:

A

The qualified opinion, adverse opinion, and disclaimer of opinion.

71
Q

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.

A

Material Weakness

72
Q

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.

A

Negative Assurance

73
Q

A confirmation in which a response is requested only if the amount stated is incorrect.

A

Negative Confirmations

74
Q

In sampling, an approximation of the true balance of an account, determined by applying the projected misstatements to the recorded balance.

A

Point Estimate

75
Q

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.

A

Precision Interval

76
Q

A confirmation in which the recipient is requested to respond regardless of whether the information included (if any) is accurate.

A

Positive Confirmation

77
Q

A method sampling in which auditor use their judgment (rather than mathmatical formulae) to estimate risk, determine sample size, and estimate risk.

A

Nonstatistical Sampling

78
Q

Examples of nonsampling risk include:

A

Selecting inappropriate audit procedures, or failing to recognize a misstatement in documents examined.

79
Q

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.

A

Operating Effectiveness of Controls

80
Q

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.

A

Parallel Simulation

81
Q

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.

A

Other-Matter Paragraph

82
Q

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.

A

Outside Directors

83
Q

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.

A

Performance Audits

84
Q

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.

A

Qualified Opinion

85
Q

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.

A

Pro-Forma Financial Statements

86
Q

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.

A

Probability-Proportionate-to-Size (PPS) Sampling

87
Q

A governmental audit used in situation when no overall opinion is rendered on the financial statements.

A

Program-Specific Audit

88
Q

Must follow specialized rules designed for the particular type of program involved.

A

Program-Specific Audit

89
Q

Financial statements that attempt to reflect a company’s expexted financial position and expected results of operations.

A

Prospective Financial Statements (Financial Projection & Financial Forecast)

90
Q

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.

A

Projected Misstatement

91
Q

A firms quality control system is composed of five elements:

A
  1. Acceptance & Continuance of Clients and Engagements
  2. Independence, Integrity & Objectivity
  3. Monitoring
  4. Personnel Management
  5. Engagement Performance
92
Q

A system designed to ensure that services are completely delivered and adequately supervised.

A

Quality Control System

93
Q

A sampling plan that uses the ratio of the auditing (correct) values of items to their book values, to project the true population value.

A

Ratio Estimation

94
Q

A sample selected in such a way that every item in the sample has an equal chance of being included in the sample.

A

Random Sample

95
Q

Controls designed to elimate or reduce to an acceptably low level threats to independence.

A

Safeguards

96
Q

A report on the design and implementation of a service organizations controls. It does not provide assurance on the operating effectiveness of controls.

A

“Type 1 Report” - Report on Management’s Description of the Service Organization’s System and the Suitability of the Design of Controls

97
Q

A report on the design, implementation, and operating effectiveness or a service organization’s controls.

A

“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
Q

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.

A

Reissued Report

99
Q

Related Parties include a reprting entity’s:

A

Affiliates, principal owners, and management; also any members of their immediate families.

100
Q

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.

A
  1. Auditing Standards (nonissuers) = Five years from the report release date
  2. PCAOB Standards (issuers) = Seven years from the report release date
101
Q

The date on which the auditor grants the client permission to use the report

A

Report Release Date

102
Q

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.

A

Review

103
Q

An entity’s identification and analysis of the risks to the acheivement of its objectives.

A

Risk Assessment (oerformed by the entity)

104
Q

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.

A

Risk Assessment (performed by the auditor)

105
Q

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.

A

Single Audit

106
Q

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.

A

Single Audit Act

107
Q

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.

A

Significant Deficiency

108
Q

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),

A

Sampling Interval

109
Q

In sampling, the item selected from the population for testing.

A

Sampling Unit

110
Q

The susceptibility of the financial statements to error.

A

Risk of Material Misstatement (comprised of inherent risk and control risk)

111
Q

Audit procedures that aid the auditor in identifying obligations that hsould have been recorded at the balance sheet date, but were not.

A

Search for Unrecorded Liabilities

112
Q

A governmental commision given the authority to set guiudelines for publicly traded companies.

A

SEC

113
Q

A puplication of the U.S government Accountability Office (GAO), entitles “Governemtn Auditing Standards,” which represents the source of GAGAS.

A

Yellow Book

114
Q

A mathmatical measure of population variability

A

Standard Deviation

115
Q

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.

A

Special Purpose

116
Q

Standards issued by the Auditing Standards Board (ASB) of the AICPA

A

Statements on Auditing Standards (SAS)

117
Q

In sampling, the separation of the total population into several relatively homogeneous groups, with each group then treated as a separate population.

A

Stratification

118
Q

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.

A

Stop-or-Go Sampling (Sequential Sampling)

119
Q

Standards established by the AICPA to regulate the porvision of services to privately held companies not seeking audited statements.

A

Statements on Standards for Accounting and Review Services (SSARS)

120
Q

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.

A

Statistical Sampling

121
Q

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.

A

Structural Threat

122
Q

An engagement that provides assurance on the realibility of a defined electronic system.

A

SysTrust Engagement

123
Q

In sampling, a method of sample selection whereby every nth item in a population is chosen as part of the sample.

A

Systematic Selection

124
Q

In sampling, the sum of the sample deviation rate and the allowance for sampling risk.

A

Upper (Maximum) Deviation Rate

125
Q

An amount and type of audit evidence that is considered adequate to support an opinion on the financial statements.

A

Sufficient (Sufficiency of Audit Evidence)

126
Q

The threat that external influences or pressures will impact and auditor’s ability to make independent and objective judgments.

A

Undue Influence Threat

127
Q

Those who bear responsibility to oversee the obligations and strategic direction of an entity.

A

Those Charged with Governance

128
Q

Standards issued by senior technical bodies of the AICPA regarting attest engagements which includes:

A

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
Q

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.

A

WebTrust Engagement

130
Q

A technique used by the auditor to electronically mark specific transaction and follow them through the client’s system.

A

Transaction Tagging

131
Q

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.

A

Walkthroughs

132
Q

A statistical sampling method used to estimate the numerical measurement of a population such as the dollar value.

A

Variables Sampling

133
Q

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.

A

Top-Down Approach

134
Q

In sampling, the maximum rate of deviation from which a prescribed procedures that the auditor will tolerate without modifying planned reliance on internal control.

A

Tolerable Deviation Rate

135
Q

A group of matched documents related to a particular purchase (includes):

A

Voucher Packet > Includes (requisition, purchase order, receiving report, and vendor invoice)

136
Q

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.

A

Tolerable Misstatemetnt > based on preliminary assessment of materiality

137
Q

An auditor’s report stating that the financial statements are presented fairly in all material respects in accordance with the applicable fiancial reporting framework.

A

Unmodified Opinion

138
Q

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.

A

Tests of Control

139
Q

Test of Controls include:

A
  1. Inquiry
  2. Inspection
  3. Observation
  4. Reperformance
140
Q

Performed when the auditor’s risk assessment is based on th assumption that controls are operating effectively.

A

Tests of Controls

141
Q

A restriction on the engagement that occurs when the accountant is unable to fully complete necessary procedures.

A

Scope Limitation

142
Q

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.

A

Self-Review Threat

143
Q

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.

A

Signigicant Audit Findings

144
Q

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.

A

Significant Engagement Deficiency

145
Q

The existence of a significant engagement deficiency:

A

Prevents the engagement quality reviewer from providing concurring of issuance.

146
Q

The quality of being both reliable (valid, factual, objective, and supportable), and relevant (realted to the financial statement assertion under consideration).

A

Appropriate (Appropriateness of Audit Evidence)

147
Q

Electronic method used to test an automated transaction processing system. Emphasis is placed on the input and processing stages of transaction processing.

A

Computer Assisted Auditing Techniques (CAAT)

Final Review (2 decks)

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