Shared Flashcard Set

Details

Acct 407 - Exam 1
Chapter 5
32
Accounting
Undergraduate 4
02/20/2010

Additional Accounting Flashcards

 


 

Cards

Term
information risk. auditors can lend credibility to information but cannot assess business risk.
Definition
_ is the probability that info circulated by a company will be false or misleading
Term
assurance
Definition
_ is the lending of credibility to information
Term
attestation
Definition
_ is assurance lent to primarily finc info
Term
auditing
Definition
when assertions are embodied in financial statements, the assurance is called _
Term
existence or occurrence
Definition
_ is an assertion relating to whether account balances are accurate and whether a transaction happened or not.
Term
rights and obligations
Definition
_ is an assertion used to establish that amounts reported as assets or liabs are actually those things
Term
completeness (cutoff)
Definition
_ is an assertion that all transactions, events, A, L, and E that should have been recorded have been. Also, they assert that these have been recorded in the proper period.
Term
valuation and allocation
Definition
_ is an assertion that the transactions and events that have been recorded accurately and that account balances have been valued correctly (LCM)
Term
presentation and disclosure
Definition
_ is an assertion that all transactions have been presented correctly and that all relevant info has been disclosed to finc stmt users
Term
unqualified
Definition
a _ audit report is the best report. means finc stmts are in conformity with gaap
Term
qualified
Definition
a _ audit report is the second best. means something minor is wrong. "everything is ok except for..." limited departure from gaap. scope limitation (disallowed/unable to see info)
Term
adverse
Definition
a _ audit report is the worst opinion. finc stmts do not conform with gaap and they refuse to fix it
Term
disclaimer
Definition
a _ audit report means no opinion is given. significant scope limitation
Term
2. plan the audit 2. obtain understanding of client 3. assess risks of material misstatement 4. perform audit procedures 5. complete audit 6. form opinion, issue report
Definition
6 steps of the audit process
Term
1. error = unintentional mistake (math error) 2. fraud = intentional misrepresentation 3. a. direct effect illegal act = broken law has direct tie-in to finc stmts (income tax evasion) b. indirect effect illegal act = no direct tie-in to finc stmts (health & safety violations)
Definition
what's the difference between an error, fraud, and an illegal act(two types)?
Term
1. misrepresenting finc stmts (mgmt fraud) 2. misappropriation of assets (theft) 3. embez/larsony (read book)
Definition
three kinds of fraud
Term
1. audit team discussion (required, set proper tone) 2. obtain info to ID risks (make inquiries, use planning/analytical procedures) 3a. ID risk factors related mgmt's characteristics and influence 3b. Assess fraud risks (type, significance, likelihood, pervasiveness, assess controls) 4. respond to assessed risks 5. evaluate audit evidence (what could go wrong?) 6. Communicate fraud matters (SAS 99: if mgmt fraud, send to AC. if non, send one lvl above) 7. document fraud matters
Definition
7 steps of considering the risk of fraud
Term
audit risk = inherent risk * control risk * detection risk
Definition
_ is the likelihood that the auditor fails to give the right opinion. AR equation?
Term
IR * CR
Definition
_ is the risk of material misstatement. auditor cannot control this
Term
inherent risk. routine, non-routine, estimation
Definition
_ is a measure of the susceptibility of an account to misstatement. always present. _ tasks are least risky, _ tasks are 2nd risky, and _ tasks are the most risky
Term
control risk
Definition
_ is the likelihood that the client's internal controls fail
Term
detection risk. sampling risk. nonsampling risk
Definition
_ is the risk that a material misstatement would not be caught by audit procedures. it's the amount of risk an auditor can allow and maintain its desired audit risk. _ risk is the risk that we choose an unrepresentative sample. _ risk is the risk that we miss the problem even though it's visible within the correct sample
Term
1. vouching/tracing 2. scanning 3. inspection of tangible assets 4. observation 5. inquiry 6. confirmation (AR conf. from 3rd parties) 7. recalculation 8. reperformance 9. analytical procedures (finc ratios)
Definition
9 general audit procedures
Term
1. client selection and retention 2. staff assignment 3. time budget 4. communication b/w predecessor and successor auditors 5. continually review independence
Definition
what 5 things go on during Pre-Engagement Arrangements?
Term
Job Arrangement Letter (engagement letter)
Definition
once the auditor has accepted the engagement, they prepare a _.
Term
preliminary analytical procedures/reasonableness test. must be used in preliminary planning and final review
Definition
a _ is when an auditor does an independent estimate and then compares it to what the client has done. when must this _ be used?
Term
1. transaction trails 2. uniform processing of transactions 3. segregation of duties 4. potential for fraud 5. potential for increased mgmt supervision 6. automated initiation or subsequent execution of transactions
Definition
6 effects of computer processing on transactions
Term
audit documentation (AS 3)
Definition
_ is the written record of the basis for the auditor's conclusions (about mgmt's assertions) that provides the support for the auditor's representations, whether those representations are contained in the auditor's reports or otherwise. objectives are to improve audit quality and enhance investor confidence
Term
1. planning/performance of work (who? what? when?) 2. procedures performed 3. evidence obtained 4. conclusions reached by auditor
Definition
4 contents of Audit Documentations (AS 3)
Term
1. integral part of audit quality 2. documents the nature, timing and extent of work performed 3. evidence of due professional care 4. basis for conclusion 5. facilitates planning, performance and supervision 6. provides basis for hierarchical review (meaning one lvl above reviews work)
Definition
6 purposes of Audit Documentation (AS 3)
Term
permanent files. prior year files. current files.
Definition
__ are docs that stay the same in the audit file (articles of incorp, stock agreements, contracts). _ files are taken with auditor during audit. _ files are frequently organized in admin section (schedule/fees/staff) and audit support section (#crunching)
Term
Summary Review Memo
Definition
the _ details how we addressed the issues we though we might have
Supporting users have an ad free experience!