Pages 901=907 of Ch 38 from SOA

Question 1

vouching

Answer 1

when accountants choose a transaction listed in the company’s books and check backwards to make sure that there are original data to support it

Question 2

GAAP

Answer 2

generally accepted accounting principles, rules set by the Financial Accounting Standards Board to be used in preparing financial statements

Question 3

GAAS

Answer 3

generally accepted auditing standards, rules set by the American Institute of Certified Public Accountants (AICPA) to be used in conducting audits

Question 4

unqualified opinion

Answer 4

(also known as a clean opinion), indicates that the company’s financial statements fairly present its financial condition in accordance with GAAP

Question 5

Qualified opinion

Answer 5

indicates that although the financial statements are generally accurate, there is nonetheless an outstanding, unresolved issue

Question 6

Adverse Opinion

Answer 6

bad news, in auditor’s view, the company’s financial statements do not accurately reflect its financial position

Question 7

disclaimer of opinion

Answer 7

not good news, issued when auditor does not have enough info to form an opinion

Question 8

PCAOB

Answer 8

Public Company Accounting Oversight Board - established by Congress to ensure that investors receive accurate and complete financial information

Question 9

engagement letter

Answer 9

a written contract between accountants and their clients, both expressed and implied terms

Question 10

An accountant is liable for negligence to a client who can prove both of the following elements:

Answer 10

accountant breached duty to client by failing to exercise skill and competence, accountant’s violation of duty caused harm to the client