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ACTG 492 mid term
Terms in this set (62)
A list of the audit procedures auditors need to perform to gather sufficient appropriate evidence on which to base their opinion on the financial statements
specialized actions auditors take to obtain evidence in an engagement.
Audit quality guides that apply to all audits
the probability that a material misstatement (error or Fraud) will not be prevented or detected on a timely basis by the entity's internal controls
the risk that the audit team's substantive procedures will fail to detect a material misstatement.
a level of performance that would be exercised by reasonable auditors in similar circumstances; auditors are expected to posses the skills and knowledge of others in their profession and are not expected to be infallible.
engagement quality control review
internal evaluation of the significant judgments made by the audit team and the conclusions reached in formulating its report on an engagement conducted by that firm.
the information used by auditors in arriving at the conclusion on which the audit opinion is based, which includes the underlying accounting data and all available corroborating information.
financial reporting framework
a set of criteria used to determine the measurement, recognition, presentation, and disclosure of material items in the financial statements.
independence (in appearance)
the extent to which others (particularly financial statement users) perceive auditors to be independent.
Independence (in fact)
an auditor's mental attitude and impartiality with respect to the client
probability that a material misstatement (error or fraud) will occur in an account balance or class of transaction
an evaluation of an accounting firm's audit engagements and system of quality control conducted by the PCAOB and required for any firms providing auditing services to public entities.
Important information as it relates to financial reporting, the dollar amount that would influence the lending or investing decisions of financial statement users.
the application of relevant training, knowledge, and experience in making informed decisions about appropriate courses of action during the audit engagement.
a state of mind that is characterized by appropriate questioning and a critical assessment of audit evidence.
an entity that offers registered securities, such as stock and bonds, for sale to the general public.
concept that a GAAS audit may not detect all material misstatements and auditors are not "insurers" or "guarantors" regarding the fairness of the entity's financial statements.
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.
Procedures used by auditors to obtain assurance as to the fairness of the entity's financial statements.
Sufficiency (audit evidence)
the measure of the quality of audit evidence (the number of transactions or components evaluated).
unmodified (or Unqualified) Opinion
an opinion which concludes that the financial statements present an entity's financial condition, results of operations, and cash flows in conformity with GAAP.
the reasonableness test used to gain an understanding of financial statement accounts and relationships.
continuing audit files (or permanent files)
the audit documentation containing information of continuing audit significance for current and past audits of the same client.
this letter sets forth the understanding with the client, the objectives of the engagement, management's responsibilities, the auditor's responsibilities, and any limitations of the engagement.
the "special events report" filed with the SEC whenever certain significant corporate events such as changes in control, legal proceedings, and changes in auditor occur.
a comprehensive list of specific audit procedures that the audit team needs to perform to gather sufficient appropriate evidence on which to base their opinion on the financial statements. the professional standards require that the auditor plan each audit engagement, including the establishment of an overall strategy for each audit engagement.
interim audit work
the procedures performed several weeks or months before the balance sheet date
A summary of accounts in or components of an account group
the document summarizing the preliminary analytical procedures and the materiality assessment with specific directions about the effect on the audit.
Quality assurance partner
The second audit partner on the audit team as required for audits of financial statements filed with the SEC who reviews the audit teams work in critical audit areas (those areas with the highest potential audit risk).
Substantive audit plan
Document that contains a list of audit procedures for gathering evidence related to the relevant assertions identified for the significant financial statement accounts and disclosures on an audit client.
an audit procedure in which the auditor selects a basic source document and follows its processing path forward to find its final recording in a summary journal or ledger. (may be used to follow the path in either direction)
An audit procedure in which an auditor selects an item of financial information, usually from a journal or ledger, and follows its path back through the processing steps to its origin (i.e. the source documentation that supports the item selected)
Year end audit work
the procedures performed shortly before and after the balance sheet date.
the approximations of F/S numbers often included in F/S.
A subset of a company's board of directors composed of outside members (those not involved in the day-to-day operations of the company) who can provide a buffer between the audit firm and management.
the risk that an auditor will express an inappropriate audit opinion when the F/S are materially misstated (e.g. giving an unmodified opinion on F/S that are misleading because of material misstatements the auditors failed to discover).
audit strategy memorandum
the scope, timing, and direction for auditing each relevant assertion based on the results of the audit risk model.
risks that result from significant conditions, events, circumstances, actions, or inaction's that could adversely affect a company's ability to achieve it's objectives and execute its strategies as well as from setting inappropriate objectives and strategies or from changes or complexity in the company's operations or management.
the probability that a client's internal control activities will fail to prevent or detect material misstatements provided that they enter or would have entered the accounting system.
employee fraud and embezzlement
the violations of laws or govt. regulations by the entity or its management or employees that produce direct and material effects on dollar amounts in F/S.
type of fraud involving employees or non-employees wrongfully taking money or property entrusted to their care, custody, and control, often accompanied by false accounting entries and other forms of lying and cover-up.
the use of fraudulent means to take money or other property from an employer. It consists of three phases: 1. the fraudulent act, 2. the conversion of the money or property to the fraudster's use, 3. the cover up.
enterprise risk management (ERM)
a process effected by an entity's board of directors, management, and other personnel applied in strategy setting across the enterprise that is designed to identify potential events that may affect the entity and to manage risks to be within its risk appetite to provide reasonable assurance regarding the achievement of entity objectives.
unintentional misstatements or omissions of amounts or disclosures in financial statements.
the audit procedures used in response to heightened fraud awareness as the result of the identification of significant risk.
the act of knowingly making material misrepresentations of fact with the intent of inducing someone to believe the falsehood and act on it and, thus, suffer a loss or damage.
fraudulent financial reporting
the intentional or reckless conduct, whether by act or omission, that results in materially misstated F/S.
the comparative analysis of year to year changes in balance sheet and income statement accounts
indirect effect noncompliance
the violation of laws and regulations that does not directly affect specific F/S accounts or disclosures
the probability that the information circulated by an entity will be false or misleading
the probability that in the absence of internal controls, material errors of frauds could enter the accounting system used to develop F/S.
the simple theft of an employers property that is not entrusted to an employees care, custody, or control.
the deliberate fraud committed by management that injures investors and creditors through materially misstated information.
a F/S assertion that has a reasonable possibility of containing a misstatement or misstatements that would cause the F/S to be materially misstated.
individuals or organizations that are closely tied to the audit client, possibly through family ties or investment relationships.
Risk of material misstatement
the combines inherent and control risk.
significant account or disclosure
an account or disclosure that has a reasonable possibility of containing a material misstatement individually or when aggregated with others regardless of the effect of controls.
the common size analysis of F/S amounts created by expressing amounts as proportions of a common base such as sales for the income statement accounts or total assets for the balance sheet accounts.
white collar crime
Fraud perpetrated by people who work in offices and steal with a pencil or from a computer terminal.
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