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ACCY 360 Definitions
Terms in this set (59)
Independent professional services that improve the quality of information, or its context, for decision makers. Encompasses attest services and financial statement audits.
A service when a practitioner is engaged to issue or does issue a report on subject matter, or an assertion about subject matter, that is the responsibility of another party. Encompasses financial statement audits.
All the information used by the auditor in arriving at the conclusions on which the audit opinion is based. Audit evidence includes the information contained in the accounting records underlying the financial statements, as well as other information.
The risk that the auditor expresses an inappropriate audit opinion when the financial statements are materially misstated.
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.
Expressed or implied representations by management that are reflected in the financial statement components.
The maximum amount by which the auditor believes the financial statements could be misstated and still not affect the decisions of users.
An instance where a financial statement assertion is not in accordance with the criteria against which it is audited. Misstatements may be classified as fraud, other illegal acts such as noncompliance with laws and regulations and errors.
The concept that an audit done in accordance with auditing standards may fail to detect a material misstatement in a client's financial statement. In an auditing context this term has been defined to mean a high but not absolute level of assurance.
The end product of the auditor's work, indicating the auditing standards followed and expressing an opinion as to whether an entity's financial statements are fairly presented in accordance with agreed upon criteria.
Risk of Material Misstatement
The pre-audit risk that the entity's financial statements are fairly presented in accordance with agreed upon criteria.
Unqualified/Unmodified Audit Report
A clean audit report, indicating the auditor's opinion that a client's financial statements are fairly presented in accordance with agreed upon criteria.
A committee consisting of members of the board of directors, charged with overseeing the entity's system of internal control over financial reporting, internal, and external auditors, and the financial reporting process. Members typically must be independent of management.
Board of Directors
Persons elected by the stockholders of a corporation to oversee management and to direct the affairs of the corporation.
Processes implemented by management to achieve entity objectives. Typically organized into following categories, revenue, purchasing, human resources, inventory, and finance.
Code of Professional Conduct
A set of principles, rules, and interpretations that establish guidance for acceptable behavior for accountants and auditors.
The oversight mechanisms in place to help ensure the proper stewardship over an entity's assets. Management and the board of directors play primary roles, and the independent auditor plays a key facilitating role.
A system of code of conduct based on moral duties and obligations that indicates how an individual should behave.
Accounting principles that are generally accepted for the preparation of financial statements in the United States. Issued primarily by FASB, with oversight and influence from SEC.
Ten broad statements guiding the conduct of financial statement auditing. Still found in in PCAOB standards but have been replaced in ASB Standards.
A state of objectivity in fact and in appearance, including the absence of any significant conflicts of interest.
An audit of both financial statements and internal control over financial reporting, provided by the external auditor. Required for public companies.
International Standards on Auditing
Statements issued by IFAC's International Auditing and Assurance Standards Board.
Management Advisory Services
Consulting services that may provide advice and assistance concerning an entity's organization, personnel, finances, operations, systems, or other activities.
Evaluations of financial information through analysis of plausible relationships among both financial and non-financial data.
Specific acts performed as the auditor gathers evidence to determine if specific audit objectives are being met.
The auditor's plans for the expected conduct, organization, and staffing of the audit.
Closest Reasonable Estimate
A range of acceptable amounts or a precisely determined point estimate for an estimate, if that is better than any other amount.
Dual Purpose Tests
Tests of transactions that both evaluate the effectiveness of controls and detect monetary errors.
A letter that formalizes the contract between the auditor and the entity and outlines the responsibilities of both parties.
Audit procedures performed to test material misstatements in an account balance or disclosure component of the financial statements.
Substantive Tests of Transactions
Tests to detect errors or fraud in individual transactions.
Tests of Controls
Audit procedures performed to test the operating effectiveness of controls in preventing, or detecting and correcting, material misstatements at the relevant assertion level.
Tests of Details
Substantive tests that concentrate on the details of items contained in the account balance and disclosure.
The amount of the overall materiality that is used to establish a scope for the audit procedures for the individual account balance or disclosures.
Risks, resulting from 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 or through the setting of inappropriate objectives or strategies.
The risk that a misstatement that could occur in an assertion about an account or disclosure and that could be material, either individually or in combination with other misstatements, will not be prevented, or detected and corrected, on a timely basis by the entity's internal control.
The risk that the procedures performed by the auditor will not detect a misstatement that exists and that could be material either individually or in combination with other misstatements.
The risk that the auditor is exposed to financial loss or damage to his or her professional reputation from litigation, adverse publicity, or other events arising in connection with financial statements audited and reported on.
Unintentional misstatements or omissions of amounts or disclosures
An intentional act by one or more among management, those charged with governance, employees, or third parties, involving the use of deception that results in a misstatement in the financial statements.
The susceptibility of an assertion in an account or disclosure to a misstatement due to error or fraud that could be material, either individually or in combination with other misstatements, before consideration of any related controls.
An attitude that includes a questioning mind and a critical assessment of audit evidence. The auditor should not assume that management is either honest or dishonest.
The identification analysis, and management of risks relevant to the preparation of financial statements that are fairly presented in conformity with GAAP.
Scope of the Audit
Refers to the nature, timing, and extent of audit procedures, where nature refers to the type of evidence, timing refers to when evidence will be gathered, and extent refers to how much of they type of evidence will be evaluated.
A risk of material misstatement that is important enough to require special audit consideration.
The auditor's principal record of the work performed and the basis for the conclusions in the auditor's report. Facilitates the planning, performance, and supervision of the engagement and provides the basis for review of the quality of work by providing the reviewer with the written documentation of the evidence supporting the auditor's significant conclusions.
Represents audit evidence obtained by the auditor as a direct written response to the auditor from a third party in paper form of by electronic or other media.
Seeking information of knowledgeable persons, both financial and nonfinancial, within an entity or outside the entity.
Inspection of Records and Documents
Examination of internal and external records or documents that are in paper form, electronic form, or other media.
Inspection of Tangible Assets
Physical examination of the tangible assets.
Process of watching a process or procedure being performed by others.
The auditor's checking the mathematical accuracy of documents or records either manually or electronically.
Relevance of Evidence
Refers to its relationship to the assertion or to the objective of the control being tested.
Reliability of Evidence
Whether the type of ____ can be relied on to signal the true state of assertion.
The auditor's independent execution of procedures or controls that were originally performed as part of the entity's internal control, either manually or through the use of computer-assisted audit techniques.
Reviewing accounting data to identify significant or unusual items.
An engagement that requires independence as defined in AICPA Professional Standards. Include financial statement audits, reviews, and examinations of prospective financial information.
The conduct, aims, or qualities that characterize or mark a profession or professional person.
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