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AUD CPA Glossary
Terms in this set (78)
One of three categories of financial statement assertions, relating primarily to assets, liabilities, and equity interests.
An approximation of a financial statement element, item, or account used because data either is not readily available or is dependent upon the outcome of future events.
Accounts Payable Confirmation
A request for independent verification of payables.
Accounts Receivable Confirmation
A request for independent verification of receivables. Note that confirming accounts receivable is a required, generally accepted auditing producre.
A financial statement assertion in the "transactions and events" category indicating that amounts and other data relating to recorded transactions and events have been recorded properly.
Accuracy and Valuation
A financial statement assertion in the "presentation and disclosure" category indicating that financial and other information are disclosed fairly and at appropriate amounts.
A ratio that measures how effectively an enterprise is using its assets.
An auditor's report stating that the financial statements "do not present fairly..."
A listing of accounts receivable categorized by age (i.e., current, 30 to 60 days, 60 to 90 days, etc.).
An engagement in which a practitioner is engaged to issue a report of findings based on specific agreed-upon procedures.
AICPA Code of Professional Conduct
Guidelines for the behavior of members of the American Institute of Certified Public Accountants (AICPA) in the conduct of their professional affairs.
Allowance for Sampling Risk
In sampling, a "cushion" for protection against undetected deviations that is added to the sample deviation rate to arrive at the upper deviation rate.
An IT (Information Technology) department employee who determines system requirements and designs a processing system to meet those requirements.
Evaluations of financial information made by a study of plausible relationships among both financial and nonfinancial data.
Applicable Financial Reporting Framework
The financial reporting framework that is acceptable in view of the nature of the entity and the objective of the financial statements, or that is required by law or regulation.
Information processing controls that apply to the processing of individual "applications" (e.g., controls surrounding receivables, controls surrounding payroll, etc.).
Appropriate (Appropriateness of Audit Evidence)
The quality of being both reliable (valid, factual, objective, and supportable) and relevant (related to the financial statement assertion under consideration).
Articles of Incorporation
A document filed with the state to create a corporation.
A declaration about whether a subject matter is based on or in conformity with selected criteria.
Association with Financial Statements
A relationship that arises when an accountant consents to the use of his or her name in connection with financial statements, or when an accountant has prepared the financial statements.
Assumption of Responsibility
A situation in which the group engagement partner decides to assume responsibility for the work performed by a component auditor, and therefore does not refer to the component auditor in the auditor's report.
An engagement in which a practitioner is engaged to issue or does issue an examination, a review, or an agreed-upon procedures report on subject matter, or on an assertion about the subject matter, that is the responsibility of another party.
A statistical sampling method used to estimate the rate of occurrence of a specific characteristic or attribute in a population.
Attributes of Risk
Four characteristics used in analyzing risk: type, significance, likelihood, and pervasiveness.
A methodical review and objective examination of an enterprise's financial statements.
A proposed correction to the financial statements resulting from the auditor's procedures.
A committee of the board of directors, generally made up of three to five members of the board who are "outside directors"; responsible for the selection and appointment of the independent external auditor, and for reviewing the nation and scope of the engagement.
Audit Documentation (Working Papers)
The principal record of procedures performed, evidence obtained, and conclusions reached.
The underlying accounting data and corroborating information that must be obtained to support auditor conclusions.
Goals of audit testing, developed in light of financial statement assertions.
A listing of audit procedures necessary to accomplish the objectives of the audit; required for every audit.
The risk that an auditor may unknowingly fail to modify appropriately the opinion on financial statements that are materially misstated.
Audit Risk of Noncompliance
The risk that the auditor may unknowingly fail to appropriately modify the opinion on compliance in a compliance audit. It is comprised of the risk of material noncompliance and detection risk of noncompliance.
The testing of less than 100 percent of the items within an account balance or class of transactions in order to evaluate some characteristic of the balance or class.
An overall plan for the audit, typically used to develop the more detailed audit plan.
Evidence indicative of the sequential flow of accounting operations.
Auditing Around the Computer
A technique in which the auditor tests the input data, processes the data independently, and then compares his or her independently determined results to the program results.
Tasks performed to accomplish the objectives of the audit.
A document, presented by the auditor to a client or others, containing information in addition to the audited financial statements.
An independent bank verification of year-end bank balances; also may provide information regarding loans, contingent liabilities, discounted notes, pledged collateral, and guarantees or security agreements.
A schedule that compares the cash balance reported by the bank to the cash balance reported by the client, and explains any differences.
Bank Transfer Schedule
A schedule that itemizes transfers of cash among banks, including the record date per the client and the transaction date per the bank.
The threat that an auditor will, as a result of political, ideological, social, or other convictions, take a position that is not objective.
Bill of Lading
A shipping document issued by a carrier evidencing receipt of goods and terms of transport.
A confirmation in which the recipient is requested to fill in the balance.
Block (Cluster) Sampling
In sampling, the selection of groups of adjacent items.
An open exchange of ideas; required during planning as a means of evaluating the potential for material misstatement due to fraud.
Capsule Financial Information
Unaudited summarized interim information for subsequent periods.
A financial statement assertion in the "transactions and events" category indicating that transactions and events have been recorded in the proper accounts.
Classification and Understandability
A financial statement assertion in the "transactions and events" category indicating that financial information is appropriately presented and described and disclosures are clearly expressed.
A document required by the client containing both audited financial statements and additional information (e.g., annual reports to shareholders, reports by charitable organizations to the general public, etc.)
An audit approach in which both tests of the operating effectiveness of controls and substantive procedures are used. If controls are operating effectively, less assurance will be required from substantive procedures.
A letter from the CPA to the named underwriter and/or certain other requesting parties (e.g., client, broker-dealer, financial intermediary, or buyer/seller) just before the registration of the client's securities. It covers the period from the date of the last auditors' report to the "effective date" of the registration.
Common Size Financial Statements
Restated financial statements in which each balance sheet component is expressed as a percentage of total assets, and each income statement component is expressed as a percentage of total revenue.
An engagement in which an accountant presents in the form of financial statements information that is the representation of management.
A financial statement assertion appearing in all three assertion categories and indicating that all transactions, events, assets, liabilities, and equity interests that should have been recorded have been recorded, and that all disclosures that should have been included in the financial statements have been included.
An engagement under GAAS and GAGAS in which the auditor reports on whether the entity complied, in all material respects, with the compliance requirements applicable to its program. Additional Single Audit Act requirements may apply.
An entity or business activity that prepares financial information that is included in the group financial statements.
An auditor who performs work on the financial information of a component that will be used as audit evidence for the group audit. A component auditor may be part of the groups engagement partner's firm, a network firm, or another firm.
Components of Internal Control
Interrelated elements of internal control used to achieve an entity's objectives; internal control components consist of: control environment, risk assessment, information and communication systems, monitoring, and (existing) control activities.
Computer Assisted Audit Techniques (CAAT)
Electronic methods used to test an automated transaction processing system; emphasis is placed on the input and processing states of transaction processing.
An IT (Information technology) department employee who converts data into machine-readable form during the input stage (e.g., keypunch operator).
An IT (Information technology) department employee who develops and writes computer programs.
Concurring Approval of Issuance
Approval of the issuance of the engagement report granted by the engagement quality reviewer under PCAOB standards. A firm cannot give an issuer permission to use the engagement report until concurring approval of issuance has been granted.
Condensed Financial Statements
Financial statements that are presented in considerably less detail than complete financial statements and do not include all required disclosures under GAAP.
Confidence Level (also called Reliability)
In sampling, a measure of how certain the auditor wants to be that his or her results are accurate. Note that the confidence level plus the risk of being ineffective=100 percent.
A direct written response to the auditor from a third part, either in paper or by electronic or other medium.
Goods belonging to one party that are held for sale by another party; the seller does not pay the owner until the goods have been sold.
A measure of the comparability of financial statements from one year to the next.
An event that may, but is not certain to, occur. A loss contingency that is probable and that can be reasonably estimated should be reflected in the accounts.
A fee established for performing services where no fee is charged unless a specific finding or result is obtained, or the fee amount is dependent upon the finding or result obtained.
An accountant with whom the client has an ongoing relationship, as opposed to an accountant hired only to report on the application of accounting principles.
The policies and procedures that help ensure that management directives are carried out and that necessary steps are taken to address risks.
A weakness that exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis.
The tone of an organization, including management attitude, participation of those charged with governance, organizational structure, and human resource policies.
A group of employees who are responsible for internal control within the IT (information technology) department itself.
The risk that a material misstatement that could occur in an assertion will not be prevented or detected on a timely basis by the entity's internal control.
Control Risk of Noncompliance
The risk that noncompliance with a compliance requirement that could be material will not be prevented or detected on a timely basis by an entity's internal control.
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