Auditing--Ch. 3
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Created by:
Steve_Heizmann on September 15, 2007
Subjects:
risk, assessment, and, materiality
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19 terms
Terms | Definitions |
|---|---|
 Analytical Procedures | evaluations of financial information made by a study of plausible relationships among both financial and nonfinancial data. |
| Analytical Procedures Risk | the risk that substantive analytical procedures will fail to detect material misstatements. |
| Audit procedures | specific acts performed as the auditor gathers evidence to determine if specific audit objective are being met. |
| Audit Risk | the risk that the auditor may fail to modify the opinion on materially misstated financial statements. |
| Business Risks | risks resulting from significant conditions, events, circumstances, and actions or inactions that could adversely affect management's ability to execute its strategies and to achieve its objectives, of through the setting of inappropriate objectives or strategies. |
| Closest Reasonable Estimate | a range of acceptable amounts or a precisely determined point estimate for an estimate (e.g. uncollectible receivables), if that is a better estimate than any other amount. |
| Control Risk | the risk that material misstatements that could occur will not be prevented or detected by internal controls. |
| Detection Risk | the risk that the auditor will not detect a material misstatement that exists in the financial statements. |
| Engagement Risk | the risk that the auditor's exposure to loss or injury to professional practice from litigation, adverse publicity, or other events arising in connection with financial statements audited and reported on. |
| Errors | unintentional misstatements or omissions or amounts or disclosures. |
| Expected Misstatement | the amount of the misstatement that the auditor believes exists in the population. |
| Fraud | intentional misstatements that can be classified as fraudulent financial reporting and misappropriation of assets. |
| Inherent Risk | the susceptibility of an assertion to material misstatement, assuming no related controls. |
| Materiality | the magnitude of an ommission or misstatement of accounting information that, in light of the surrounding circumstances, makes it probable that the judgement of a reasonable person relying on the information would have been changed or influenced. |
| Professional Skepticism | an atittude that includes a questioning mind and a critical assessment of audit evidence. The auditor should not assume that management is either honest or dishonest. |
| Risk Assessment | the identification, analysis, and management of risks relevant to the preparation of financial statements that are fairly presented in conformity with GAAP. |
| Risk of Material Misstatement | the auditor's combined assessment of inherent risk and control risk. |
| Tests of Details Risk | the risks that tests of details will not detect material misstatements that were not detected by internal controls or substantive analytical procedures. |
| Tolerable Misstatement | the amount of the planning materiality that is allocated to the financial statement account. |
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