Card Set Information

2012-03-07 23:54:55

Auditing Chapter 2 Terms
Show Answers:

  1. Adverse report
    a report stating that the financial statements are not presented in conformity with GAAP; the opposite of an unqualified report
  2. appropriate (audit evidence)
    appropriateness relates to the quality (relevance and reliability) of audit evidence
  3. associated with financial statements
    circumstances in which an accountant's name is used in connection with the financial statements or an accountant has prepared the statements, even if the accountant's name is not used in any written report
  4. attestation standards
    a general set of standards intended to guide attestation work in areas other than audits of financial statements
  5. audit completion date
    the date on which auditors have gathered sufficient appropriate eveidence on which to base the opinions on the financial statements and internal control over financial reporting; this is the date used on the auditors' report
  6. audit procedures
    specialized actions auditors take to obtain evidence in an engagement
  7. audit plan
    a list of audit procedures auditors need to perform to gather sufficient appropriate evidence on which to base their opinion on the financial statements
  8. auditing standards
    auditor quality guides that remain the same through time and for all audits
  9. control risk
    the probability that a material misstatment (error or fraud) will not be prevented or detected on a timely basis by the entity's internal controls
  10. departure from GAAP
    instance in which the entity's financial statments (or elements withing those financial statements) are materially misstated and do not present the entity's financial condition, results of operations, and cash flows in conformity with GAAP
  11. detection risk
    the risk that the audit team's procedures will fail to detect a material misstatement
  12. disclaimer of opinion
    auditors explicitly state that they give no opinion and no assurance on the fair presentation of the financial statements in accordance with GAAP
  13. due care
    a level of performance that would be exercised by reasonable auditors in similar circumstances; auditors are expected to possess the skills and knowledge of others in their profession and are not expected to be infallible
  14. engagement quality control review
    an internal evaluation of the significant judgements made by the audit team and the conclusions reached in formulating its report
  15. evidence
    the information used by auditors in arriving at the conclusion on which the audit opinion is based
  16. external evidence
    documentary evidence obtained directly from independent external sources
  17. external-internal evidence
    documentary evidence that is originated outside the client's information processing system but that has been received and processed by the client
  18. financial reporting framework
    a set of criteria used to determine the measurement, recognition, presentation, and disclosure of material items in teh financial statements
  19. Generally accepted accounting principles
    standards that identify the requirements for the preparation and presenation of financial statments and accompanying footnote disclosures
  20. GAAS
    standards that identify necessary qualifications and characteristics of auditors and guide the conduct of the audit examination
  21. independence (in appearance)
    the extent to which others (particularly financial statement users) perceive auditors to be independent
  22. independence (in fact)
    auditors' mental attitutde and impartiality with respect to the client
  23. inherent risk
    the probability that a material misstatement (error or fraud) will occur
  24. inspection
    an evaluation of an accounting firm's audit engagements and system of quality control conducted by the PCAOB. Inspections are required for any firms providing auditing services to public entities
  25. internal control
    an entity's capability to prevent or detect material accounting erros or frauds and provide for ther correction on a timely basis
  26. internal evidence
    documents that are produced, circulated, and maintained within the client's information system
  27. management represenation (or written representation)
    written assertions provided by management to auditors on matters such as the fairness of the entity's financial statements, availability of all financial records and related data, internal control over financial reporting and other specific representations abou tht financial statements and accounts
  28. materiality
    as it relates to financal reporting, the dollar amount that would influence the lending or investing decisions of financial statement users
  29. peer review
    a sutdy of a firm's quality control policies and procedures, followed by a report on the quality of the firm's audit practice in accordance with its system of quality control. Peer reviews are conducted through the AICPA's Center fro Public Company Audit Firms peer Review Program and are generally performed for firms that do not audit public entities
  30. professional judgement
    the applicaiton of relevant training, knowledge, and experience in making informed decisions about appropriate courses of action during the audit engagement
  31. professional skepticism
    a state of mind that is characterized by appropriate questioning and a critical assessment of audit evidence
  32. qualified report
    an auditor's report issued when the financial statements contain departures from GAAP or the audit examination was not conducted in accordance with GAAS
  33. reasonable assurance
    concept that a GAAS audit may not detect all material misstatements and auditors are not "insurers" or "guarantors" regarding the fairness of the company's financial statements
  34. Risk of Material Misstatement
    the combined probability that a material misstatement (error or fraud) will occur and not be prevented or detected on a timely basis by the entity's internal controls
  35. scope limitaiton
    situation in which auditors are unable to obtain sufficient evidence regarding the fairness of the entity's financial statements
  36. substantive procedures
    procedures used by auditors to obtain assurance as to the fairness of the entity's financial statements
  37. sufficiency (audit evidence)
    sufficiency relates to the quantity of audit evidence (the number of transactions or components evaluated)
  38. system of quality control
    policies an procedures implemented by firms to provide the firm with reasonable assurance that the firm and its personnel (1) comply with professional standards and applicable regulatory and legal requirements and (2) issue reports that are appropriate in the circumstances
  39. unqualified report
    a "clean" report that makes no mention of accounting or auditing deficiencies. The conclusion of an unqualified report is that the financial statements present the financial condition, results of operations, and cash flows in accordance with GAAP
  40. Verbal evidence
    responses to audit inquiries provided by the client's officers, directors, owners, and employees