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Auditing Chapter 2 Terms
Terms in this set (17)
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. Member 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.
Process implemented by management to achieve entity objectives. Business processes are typically organized in the following categories: revenue, purchasing, human resource management, inventory management, and financing processes.
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 auditors plays a key facilitating role.
A system or code of conduct based on moral duties and obligation that indicates how an individual should behave.
Generally accepted accounting principles (GAAP)
Accounting principles that are generally accepted for the preparation of financial statements in the United States. GAAP standards are currently issued primarily by the FASB, with oversight and influence by the SEC. International Financial Reporting Standards (IFRS) are set by the International Accounting Standards Board.
Generally accepted auditing standards (GAAS)
Ten broad statements guiding the conduct of financial statement auditing. The ten GAAS are still found in PCAOB standards but they have been replaced in the ASB standards by the "Principles Underlying an Audit Conducted in Accordance with Generally Accepted Auditing Standards."
Violations of laws or government regulations
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 (ISA)
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.
Public accounting firm
An organization created to provide professional accounting-related services, including auditing. Usually formed as a proprietorship or as a form of partnership.
Principles Underlying an Audit Performed in Accordance with GAAS
The ASB replaced the ten Generally Accepted Auditing Standards with these Principles, organized into four parts: Purpose of an Audit and Premise upon which an Audit is Conducted, Auditor Responsibilities, Audit Performance, and Audit Reporting.
Standards of the PCAOB
Standards regarding the conduct of financial statement audits for public companies. Currently consist primarily of standards and statement established by the ASB, as these statements and standards were adopted by the PCAOB in 2003 on an interim basis, though the PCAOB has added a few significant standards.
Statements on Auditing Standards (SAS)
Statements issued by the AICPA's Auditing Standards Board.
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