Audit Midterm1.txt

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  1. Accounting
    The recording, classifying, and summarizing of economic events in a logical manner for the purpose of providing financial information for decision making
  2. Assurance Service
    An independent professional service that improves the quality of info for decision makers
  3. Attestation Service
    A type of assurance service in which the CPA firm issues a report about the reliability of an assertion that is the responsibility of another party.
  4. Audit of Historical Financial Statements
    A form of attestation service in which the auditor issues a written report stating whether the financial statements are in material conformity with accounting standards.
  5. Audit Report
    The communication of audit findings to users
  6. Auditing
    The accumulation and evaluation of evidence about info to determine and report on the degree of correspondence between the info and the established criteria.
  7. Certified Public Accountant
    A person who has met state regulatory requirements including passing the Uniform CPA Examination, and has thus been certified.
  8. Compliance Audit
    (1) A review of an organization's financial records preformed to determine whether the organization is following specific procedures, rules, or regulations set by some higher authority; (2) an audit performed to determine whether an entity that receives financial assistance from the federal government has complied with specific laws and regulations
  9. Evidence
    Any information used by the auditor to determine whether the information being audited is stated in accordance with established criteria
  10. Financial Statement Audit
    An audit conducted to determine whether the overall financial statements of an entity are stated in accordance with specified criteria (usually U.S. or international accouting standards)
  11. Government Accountability Office Auditor
    An auditor working for the US GAO; the GAO reports to and is responsible solely to congress.
  12. Independent Auditors
    Certified public accountants or accounting firms that perform audits of commercial and non commercial financial entities
  13. Information Risk
    The risk that information upon which a business decision is made is inaccurate
  14. Internal Auditors
    Auditors employed by a company to audit for the company's board of directors and management
  15. Internal Control over Financial Reporting
    An engagement in which the auditor reports on the effectiveness of internal control over financial reporting, such as reports are required for public companies under Section 404 of the SOX
  16. Internal Revenue Agents
    Auditors who work for the IRS and conduct examinations of tax payers returns
  17. Operational Audit
    A review of any part of an organization's operating procedures and methods for the purpose of evaluating efficiency and effectiveness
  18. Review of historical financial statements
    A form of attestation in which a CPA firm issues a written report that provides less assurance than an audit as to whether the financial statements are in material conformity with GAAP.
  19. SOX
    A federal securities law that passed in 2002 that provides for additional regulation of public companies and their auditors; the Act established the PCAOB and also requires auditors to audit the effectiveness of internal control over financial reporting.
  20. AICPA
    American Institute of Certified Public Accountants, a voluntary organization of CPAs that sets professional requirements, conducts research, and publishes materials relevant to accounting, auditing, management consulting services, and taxes.
  21. Generally Accepted Auditing Standards (GAAS)
    10 auditing standards, developed by the AICPA, consisting of general standards, standards of field work, and standards of reporting, along with interpretations, often called auditing standards
  22. International Standards of Auditing (ISAs)
    Statements issued by the International Auditing and Assurance Standards Board of the International Federation of Accountants to promote international acceptance of auditing standards.
  23. Peer Review
    The review by CPAs of a CPA firm's compliance with its quality control system
  24. Public Company Accounting Oversight Board
    Board created by the Sarbanes Oxley Act to oversee auditors of public companies including establishing auditing and quality control standards and performing inspections of registered accounting firms
  25. Quality Control
    Methods used by a CPA firm to ensure that the firm meets its professional responsibilities to clients and others
  26. Securities and Exchange Commission
    A federal agency that oversees the orderly conduct of the securities markets; the SEC assists in providing investors in public corporations with reliable information upon which to make investment decisions
  27. Adverse Opinion
    A report issued when the auditor believes the financial statements are so materially misstated or misleading as a whole that they do not present fairly the entity's financial position or the results of its operations and cash flow in conformity with GAAP.
  28. Combined report on financial statements and internal control over financial reporting
    Audit report on the financial statements and the effectiveness of internal control over financial reporting required for public companies under Section 404 of the Sarbanes Oxley Act
  29. Disclaimer of Opinion
    A report issued when the auditor is not able to become satisfied that the overall financial statements are fairly presented or the auditor is not independent
  30. Material Misstatement
    A misstatement in the financial statements, knowledge of which would affect a decision of a reasonable user of the statements
  31. Qualified Opinion
    A report issued when the auditor believes that the overall financial statements are fairly stated but that either the scope of the audit was limited or the financial data indicated a failure to follow GAAP.
  32. Separate report on internal control over financial reporting
    Audit report on the effectiveness of internal control over financial reporting required for public companies under Section 404 of the SOX that cross references the separate audit report on the financial statements
  33. Standard unqualified audit report
    The report a CPA issues when all auditing conditions have been met, no significant misstatements have been discovered and left uncorrected, and it is the auditor's opinion that the financial statements are fairly stated in accordance with GAAP
  34. Unqualified audit report with explanatory paragraph or modified wording
    An unqualified report in which the financial statements are fairly presented, but the auditor believes it is important or is required to provide additional information.
  35. Analytical Procedures
    Use of comparisons and relationships to assess whether account balances or other data appear reasonable
  36. Balance-related Audit objectives
    Eight audit objectives that must be met before the auditor can conclude that any given account balance is fairly stated; the general balance related audit objectives are existence, completeness, accuracy, classification, cutoff, detail tie-in, realizable value, and rights and obligation
  37. Cycle Approach
    A method of dividing an audit by keeping closely related types of transaction and account balances in the same segment
  38. Error
    An unintentional misstatement of the financial statements
  39. Fraud
    An intentional misstatement of the financial statements
  40. Fraudulent financial reporting
    Intentional misstatements or omissions of amounts or disclosures in financial statements to deceive users
  41. Illegal Acts
    Violation of laws or government regulations other than fraud
  42. Management Assertions
    Implied or expressed representations by management about classes of transactions, related account balances and presentation and disclosures in the financial statements
  43. Misappropriation of Assets
    A fraud involving the theft of an entity’s assets
  44. Phases of the Audit Process
    The four aspects of a complete audit: (1) plan and design an audit approach (2) perform tests of controls and substantive tests of transactions (3) perform analytical procedures and tests of details of balances and (4) complete the audit and issue and audit report
  45. Presentation and disclosure related audit objectives
    Four audit objectives that must be met before the auditor can conclude that presentation and disclosures are fairly stated the four presentations and disclosure related audit objectives are occurrence and rights and obligations, completeness, accuracy, and valuation, and classification and understandability
  46. Relevant Assertions
    Assertions that have a meaningful bearing on whether an account is fairly stated and used to assess the risk of material misstatement and the design and performance of audit procedures
  47. Substantive tests of transactions
    Audit procedures testing for monetary misstatements to determine whether the six transactions related auditor objectives have been satisfied for each class of transactions
  48. Tests of controls
    Audit procedures to test the effectiveness of controls in support of a reduced assessed control risk
  49. Tests of details of balances
    Auditor procedures testing for monetary misstatements to determine whether the eight balance related auditor objectives have been satisfied for each signification accounting balance
  50. Transaction related adult objectives
    Six audit objectives that must be met before the auditor can conclude that the total for any given class of transactions fairly stated; the general transaction related audit objectives are occurrence, completeness, accuracy, classification, timing, and posting and summarization
  51. Analytical Procedures
    Use of comparisons and relationships to assess whether account balances or other data appear reasonable
  52. Appropriateness of evidence
    A measure of the quality of evidence; appropriate evidence is relevant and reliable in meeting audit objectives for classes of transactions, account balances and related disclosures
  53. Audit documentation
    The principal record of auditing procedures applied, evidence obtained, and conclusions reached by the auditor in the engagement
  54. Audit procedure
    Detailed instruction for the collection of a type of audit evidence
  55. Audit program
    List of audit procedures for an audit area for an entire audit; the audit program always includes audit procedures and may also include sample sizes, items to select and timing of the tests
  56. Confirmation
    The auditor’s receipt of a written or oral response from Nan independent third party verifying the accuracy of information requested
  57. Current files
    All audit files applicable to the year under audit
  58. Documentation
    The auditor’s inspection of the client’s documents and records to substantiate the information that is or should be included in the financial statements
  59. External document
    A document, such as a vendor’s invoke that has been used by an outside party to the transaction being documented and that the client now has or can easily obtain
  60. Inquiry
    The obtaining of written or oral information from the client in response to specific questions during the audit
  61. Internal document
    A document such as an employee time report that is prepared and used within the client’s organization
  62. Lead schedule
    AN addict schedule that contains the detailed accounts from the general ledger making up a line item total in the working trial balance
  63. Observation
    The use of the sense to assess client activities
  64. Permanent Files
    Auditors files that contain data of a historical or continuing nature pertinent to the current audit such as copies of articles of incarnation, by laws, bond indentures, and contracts
  65. Persuasiveness of evidence
    The degree to which the auditor is convinced that he evidence supports the audit opinion; the two determinants of persuasiveness are the appropriateness and sufficient of the evidence
  66. Physical examination
    The auditor’s inspection or count of a tangible asset
  67. Recalculation
    The rechecking of a sample of the computations made by the client including mathematical accuracy of individual transactions and amounts and the adding journals and subsidiary records
  68. Reliability of evidence
    The extent to which evidence is believable or worth of trust evidence is reliable when it is obtains (1) from an independent provider (2) form a client with effective internal control (3) from the auditors direct knowledge (4) from qualified providers such as law firms and banks (5) from object sources and (6) in a timely manner
  69. Performance – The auditor’s independent tests of client accounting procedures controls that were original y done as part of the entity’s accounting and internal control system
  70. Sufficiency of evidence
    The quantity of evidence, proper sample size
  71. Supporting Schedules
    Detailed schedules prepared by the client or the auditor in support of specific amounts of the financial statements
  72. Tick Marks
    Symbols used on an audit schedule that provide additional information or details of auditor procedures performed
  73. Unusual fluctuations
    Significant unexpected differences indicated by analytical procedures between the current year’s unaudited financial data and other data used in comparisons
  74. Vouching
    The use of documentation to support recording transactions or amounts
  75. Working trial balance
    A listing of the general ledger accounts and their year end balances
  76. Acceptable Audit Risk
    A measure of how willing the auditor is to accept that the financial statements may be materially misstated after the audit is completed and an unqualified opinion has been issued
  77. Audit Strategy
    Overall approach to the audit that considers the nature of the client, risk of significant misstatements and other factors such as the number of client locations and past effectiveness of client controls
  78. Budgets
    Written records of the clients expectations for the period; a comparison of budgets with actual results may indicate whether or not misstatements are likely
  79. Client business risk
    The risk that the client will fail to achieve its objectives related to (1) reliability of financial reporting (2) effectiveness and efficiency of operations and (3) compliance with laws and regulations
  80. Corporate minutes
    The official record of the meetings of a corporation’s board of directors and stock holders in which corporate issues, such as the deflation of dividends and the approval of contracts are documented
  81. Engagement letter
    An agreement between the CPA firm and the client as to the terms of the engagement of the conduct of the audit and related services
  82. Inherent Risk
    A measure of the auditor’s assessment of the likelihood that there is material misstatement s in a segment before considering the effectiveness of internal control
  83. Initial Audit Planning
    Involves deciding whether to accept or continue doing the audit for the client, identifying the client’s reasons for the audit, obtaining an engagement letter, and enveloping an auditor strategy
  84. Related party
    Affiliated company principal owner of the lien company or any other party with which the client ideals where one of the parties can influence the mangement nor operating policies of the other
  85. Related party transaction
    Any transaction between the client and related party
  86. Allocation of the preliminary judgment about materiality
    The process of assigning to each balance sheet account the misstatement amount considered to be material for that account based on the auditor’s preliminary judgment
  87. Audit Assurance
    A complement to acceptable audit risk; and acceptable audit risk of 2 percent is the same as audit assurance of 98 percent also called overall assurance and level of assurance
  88. Audit Risk Model
    A formal model reflecting the relationships between acceptable audit risk (AAR), inherent risk (RI), control risk (CR and planned detection risk (PDR); PDR = AAR / (RI*CR)

    • Control Risk
    • A measure of the auditor’s assessment of the likelihood that misstatements exceeding a tolerable amount in a segment will not be prevented or detected by the client’s internal controls
  89. Direct projection estimate of misstatement
    Estimate of likely misstating in a population based on a sample excluding sampling risk ,and calculated as net misstatement s instate sample divided by the total sampled, multiplied by the total recorded population value
  90. Engaged Risk
    The risk that the auditor or auditor firm will suffer harm because of a client relationship, even though the auditor report rendered for the client was correct
  91. Inherent risk
    A measure of hte3 auditors assessment of the likelihood that her are material misstatements in a segment before considering the effectiveness of the internal control
  92. Known misstatements
    Specific misstatements in a class of transactions or account balance identified during the audit
  93. Likely misstatements
    Misstatements that arise from either differences between managements or the auditor’s judgment about estimates of account balances or from projections of misstatements based on the auditors test of a sample from a population
  94. Materiality
    The magnitude of an omission or misstatement of accounting information that in the light of surrounding circumstances makes it probable that the judgment of a reasonable person relying on the information would be Anne changed or inflicted by the commission or misstatement
  95. Planned detection risk
    A measure of the risk that audit evidence for a segment will fail to detect misstatements exceeding a tolerable amount should such mistreatments exists; PDR = AAR/ (RI*CR)
  96. Preliminary judgment about materiality
    The maximum m amount by which the auditor believes that the statements could be misstated and still not affect the decision s or reasonable users; used in audit planning
  97. Revised judgment about materiality
    A change in the auditor’s preliminary judgment made when the auditor determines e that the preliminary judgment was too large or too small
  98. Risk
    The acceptance by auditors that there is some level of uncertain in performing the audit function
  99. Risk of material misstatement
    The combination of inherent risk and control risk
  100. Sampling Error
    Results because the auditor has samples only a portion of the population
  101. Tolerable misstatement
    The materiality allocated to any given account balance used in audit planning
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Audit Midterm1.txt
Audit Midterm 1 Vocab
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