Upgrade to remove ads
Only $2.99/month

Audit Ch 1

Terms in this set (22)

What is the role of auditing?
Independent 3rd party to reduce information risk
information risk
risk that information circulated by management will be false or misleading
Financial statement audit fundamental concepts
-audit risk
-materiality
-evidence
audit risk
the risk that the auditor will unknowingly fail to modify the audit opinion when a material misstatement exists
Reasonable assurance implies
some risk that a material misstatement could be present in the financial statements and the auditor will fail to detect it
Materiality
the magnitude of an omission or misstatement would likely change the judgment of a reasonable financial statement user
Evidence
consists of the underlying accounting data and any additional information available to the auditor, whether originating from the client or externally
key descriptors of audit evidence
sufficient & appropriate
relevance
is the information related to the specific assertion being tested?
Reliability
Can the information be relied upon to signal the true state of the specific assertion being tested?
As risk increases
The amount of evidence increases
As materiality decreases
the amount of evidence needed increases
Auditors use a ______________ to examine a subset of the transactions based on previous audits, an understanding of the company's internal control system, or knowledge of the company's industry
sampling approach
Three types of audit opinions
unqualified, qualified, adverse
An unqualified audit opinion means
because the financial statements are free of material misstatements, the auditor does not find it necessary to qualify his or her opinion about the fairness of the financial statements
A qualified audit report means
the financial statements are fairly stated except for the misstatement identified by the auditor
An adverse audit report means
the financial statements contain a misstatement that the auditor considers so adverse that it pervasively affects the interpretation of the financial statements; the financial statements are not fairly stated and should not be relied upon
Relationship among auditing, attest, and assurance services
auditing < attest < assurance
Assurance services
independent professional services that improve the quality of information, or its context, for decision makers
Attestation
occur when a practitioner is engaged to issue... a report on subject matter, or an assertion about subject matter, that is the responsibility of another party
Auditing
a systematic process of objectively obtaining and evaluating evidence regarding assertions about economic actions and events to ascertain the degree of correspondence between those assertions and established criteria and communicating the results to interested users
Major phases of the audit
-Client acceptance/continuance
-Preliminary engagement activities
-Plan the audit
-Consider and audit internal control
-Audit business processes and related accounts
-Complete the audit
-Evaluate results and issue audit report
THIS SET IS OFTEN IN FOLDERS WITH...