Term
|
Definition
| the chance a company takes that customers will buy from competitors, that product lines will become obsolete, that taxes will increase, that government contracts will be lost, or that employees will go on strike |
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Term
|
Definition
| the risk an entity will fail to meet its objectives |
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Term
| timely, relevant, and reliable information |
|
Definition
| characteristics of information that minimize business risk |
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Term
complexity
remoteness
time sensitivity
consequences |
|
Definition
| four environmental conditions that increase user demand for relevant, reliable information |
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Term
|
Definition
| the probability that the information circulated by a company will be false or misleading |
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Term
|
Definition
| lending of credibility to information |
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Term
|
Definition
| when assurance is provided for specific assertions made my management |
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Term
|
Definition
| when the assertions assured in an attestation are embodied in a company's financial statements |
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Term
|
Definition
| refers primarily to a certification of financial statements |
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Term
| auditing is a systematic process of objectively obtaining and evaluating evidence regarding assertions about economic actions and events to ascertain the degree of correspondence between the assertions and established criteria and communicating the results to interested users |
|
Definition
| AAA definition of auditing |
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Term
|
Definition
| By what was the Public Company Accounting Oversight Board created? |
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Term
|
Definition
| responsible for performing inspections of public accounting firms conducting audits for US companies |
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Term
|
Definition
| several sets of standards governing the quality of professional work for the auditing profession |
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Term
|
Definition
|
|
Term
| AICPA Auditing Standards Board (ASB) |
|
Definition
| rule making body of Statements on Auditing Standards (SAS's) |
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Term
|
Definition
| subject to SEC oversight; formed to ensure that audit quality is not compromised and that auditors' performance continues to meet public expectations |
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|
Term
| PCAOB has NO jurisdiction over the audits of private entities (ASB plays important role in the standard setting process) |
|
Definition
|
|
Term
| generally accepted auditing standards (GAAS) |
|
Definition
| the relevant pronouncements of the AICPA and PCAOB taken together are collectively referred to as : |
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Term
|
Definition
| auditing standards that identify necessary qualifications and characteristics of auditors and guide the conduct of the audit examination |
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|
Term
general standards
standards of field work
standards of reporting |
|
Definition
| the body of GAAS emerged from 10 basic standards that were classified into three broad categorizes |
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Term
RESPONSIBILITIES PRINCIPLE
PERFORMANCE PRINCIPLE
REPORTING PRINCIPLE |
|
Definition
| NEW fundamental principles established by the ASB |
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Term
| fundamental principle of responsibilities |
|
Definition
| defines objectivity and identifies the important role that objectivity plays in the audit |
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Term
| fundamental principle of performance |
|
Definition
| requires auditors to plan the work and to obtain and evaluate evidence through assessing the risk of material misstatement and gathering sufficient appropriate evidence |
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Term
|
Definition
| SAS's that have not been superseded or amended but he PCAOB's auditing standard |
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Term
|
Definition
| guide general conduct of audit engagements |
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|
Term
| PCAOB auditing standards and ASB statements on auditing standards |
|
Definition
| provide requirements supporting fundamental principles |
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|
Term
| interpretive publications |
|
Definition
| provide guidance on the application of GAAS |
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|
Term
|
Definition
| the particular and specialized actions that auditors take to obtain evidence in a specific audit engagement |
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Term
|
Definition
| audit quality guides that remain the same through time and for all audits |
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|
Term
| responsibilities principle |
|
Definition
| relates to the personal integrity and professional qualifications of auditors |
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|
Term
competence to preform audit
complying with ethical requirements
maintain professional skepticism and professional judgment throughout planning and performance of the audit |
|
Definition
| auditors are responsible for: (responsibilities principle) |
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|
Term
|
Definition
| independence in mental attitude; allows auditors to form an opinion on the entity's financial statements without being affected by influences that might compromise that opinion |
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|
Term
| independence in appearance |
|
Definition
| auditors must not only be unbiased, but appear to be unbiased |
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|
Term
financial relationships
managerial relationships |
|
Definition
| two general types of relationships believed to jeopardize independence (a part of responsibilities principle) |
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Term
|
Definition
| reflects a level of performance that would be exercised by reasonable auditors in similar situation (a second ethical requirement identified by the responsibilities principle) |
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|
Term
|
Definition
| a state of mind that is characterized by appropriate questioning and a critical assessment of audit evidence |
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|
Term
|
Definition
| the application of relevant training, knowledge, and experience in making informed decisions about appropriate courses of action during the audit engagement |
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|
Term
| fundamental principle of performance |
|
Definition
| sets forth general quality criteria for conducting an audit |
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|
Term
reasonable assurance
planning and supervision
materiality
risk assessment
audit evidence
risk assessment
audit evidence |
|
Definition
| five elements of the performance principle |
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Term
|
Definition
| recognizes that a GAAS audit may not detect all material misstatements and auditors are not guarantors regard in the fairness of the company's financial statements, but auditors should provide a high level of confidence regarding their work |
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Term
|
Definition
| next stage of an audit after obtaining or retaining an engagement |
|
|
Term
obtain (or retain) engagement
engagement planning
risk assessment
audit evidence
reporting |
|
Definition
|
|
Term
|
Definition
| a GAAS required list of the audit procedures auditors need to perform to gather sufficient appropriate evidence on which to base their opinion on the financial statements |
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|
Term
1. preparing the audit plan and supervising the audit work
2. obtainment knowledge of the client's business
3. dealing with the differences of opinion among the accounting firm's own personnel |
|
Definition
| 3 considerations for planing and supervising an audit |
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Term
|
Definition
| recognizes that auditors should focus on matters that are important to financial statement users |
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|
Term
|
Definition
| the dollar amt that would influence the lending/investing decisions of financial statement users |
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|
Term
|
Definition
| relatively small dollar amounts that would likely influence investment decisions |
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|
Term
|
Definition
| a system's capability to prevent or detect material accounting frauds or errors and provide for their correction on a timely basis |
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|
Term
| risk of material misstatement |
|
Definition
| a combination of inherent risk and control risk |
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|
Term
|
Definition
| the probability that a material misstatement, either an error or fraud, will occur |
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|
Term
|
Definition
| the probability that a material misstatement, either an error or fraud, will not be prevented or detected on a timely basis by the entity's internal controls |
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|
Term
| risk of material misstatement |
|
Definition
| the likelihood that an error or fraud will exist in the financial statements prior to considering the auditors' work |
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|
Term
| to help auditors determine the nature, timing, and extent of audit procedures necessary for gathering evidence about the fairness of the entity's financial statements |
|
Definition
| primary purse of assessing the risk of material misstatement |
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|
Term
|
Definition
| effective internal control reduces what kind of risk? |
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|
Term
|
Definition
| audit processors used to obtain evidence with respect to the fairness of the account balance |
|
|
Term
| audit evidence (performance principle) |
|
Definition
| requires that the audit team collect and evaluate sufficient appropriate evidence to afford a reasonable basis for their opinion |
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|
Term
|
Definition
| all of the information used by auditors in arriving at the conclusions on which the audit opinion is based |
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|
Term
|
Definition
| to qualify as "appropriate" evidence |
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|
Term
| auditors' direct, personal knowledge, obtained through physical observation and auditors' own mathematical computations |
|
Definition
| considered the most reliable evidence (top of the audit evidence quality hierarchy) |
|
|
Term
| external-internal evidence |
|
Definition
| documentary evidence that has originated outside the client's information processing system but that has been received and processed by the client |
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|
Term
|
Definition
| represents the risk that the audit team's procedures will fail to detect a material misstatement |
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|
Term
|
Definition
| the ultimate objective of independence auditors |
|
|
Term
| the principle of reporting |
|
Definition
| requires the auditor to express an opinion on the entity's financial statements |
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|
Term
| financial reporting framework |
|
Definition
| a set of criteria used to determine the measurement, recognition, presentation, and disclosure of material items in the financial statements |
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|
Term
|
Definition
| expresses an unqualified ("good") opinion on the company's financial statements |
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|
Term
|
Definition
| the entity's financial statements are materially misstated and d not present the entity's financial condition, results of operations, and cash flows in conformity with GAAP |
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|
Term
|
Definition
| the opposite of an unqualified report; concludes that the company's financial statements are not presented in conformity with GAAP |
|
|
Term
|
Definition
| concludes that except for a relatively isolated departure, the company's financial statements are presented in conformity with GAAP |
|
|
Term
|
Definition
| what kind of report is issued for auditors' inability to conduct a GAAS audit? |
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|
Term
|
Definition
| auditors' inability to conduct a GAAS audit |
|
|
Term
|
Definition
| a type of report when auditors may choose not to express an opinion on the company's financial statements; indication that an opinion cannot be expressed |
|
|
Term
| when all significant procedures have been completed by auditors and auditors have gathered sufficient appropriate evidence ("audit completion date") |
|
Definition
| when is an auditors' report dated? |
|
|
Term
qualified opinion
or
disclaimer of opinion |
|
Definition
| what types of opinions are issued when a departure from GAAS exits (aka scope limitation)? |
|
|
Term
qualified opinion
or
adverse opinion |
|
Definition
| what types of opinions are issued when a departure from GAAP exists? |
|
|
Term
|
Definition
| represent a general set of standards intended to guide attestation work in areas other than audits of financial statements |
|
|
Term
|
Definition
| refers to the ability to recognize the information being asserted, to determine the evidence reliant to the assertions, and to make decisions about the correspondence of the information asserted with suitable criteria |
|
|
Term
| t provide the firm with reasonable assurance that the firm comply with professional standards and applicable regulatory/legal requirements; issue reports that are appropriate in the circumstances |
|
Definition
| purpose of system of quality control |
|
|
Term
1. leadership responsibilities for quality within the firm
2. relevant ethical requirements
3. acceptance and continuatiance of clients
4. human resources
5. engagement performance
6. monitoring |
|
Definition
| six elements of a system of quality control identified by SQCS 7 |
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|
Term
| engagement quality control review |
|
Definition
| includes an internal evaluation of the significant judgments made by the audit team and the conclusions reached in formulating its report |
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|
Term
|
Definition
| a self regulatory process for monitoring firm quality; public accounting firms engaged other firms to study and report on quality control policies and procures and whether the quality of the firm's audit practice was consistent with its system of quality control |
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|
Term
| AICPA inspection replaces peer review of the AICPA |
|
Definition
|
|
Term
| PCAOB inspections of firms auditing public companies: annual basis for > 100 companies, 3 years for < 100 companies |
|
Definition
|
|
Term
responsibilities
performance
reporting |
|
Definition
| generally accepted auditing standards are based on three basic principles: |
|
|
Term
responsibilities
performance
reporting |
|
Definition
| generally accepted auditing standards are based on three basic principles: |
|
|
Term
possessing competence and capabilities
complying with relevant ethical requirements
maintain professional skepticism
exercising professional judgment |
|
Definition
| responsibilities principle |
|
|
Term
planning the work & supervising assistants
determine and applying appropriate materiality levels
identifying/assessing risk of material misstatement
obtaining sufficient appropriate audit evince |
|
Definition
|
|
Term
| expressing an opinion about financial statements |
|
Definition
|
|
Term
| under sarbanes oxly, firms conducting audits of public companies are required to have inspections of selected engagements and their systems of quality control by the pcaob |
|
Definition
|
|
Term
| appropriate (audit evidence) |
|
Definition
| appropriateness relates to the quality (relevance and reliability) of audit evidence |
|
|
Term
| associated with financial statements |
|
Definition
| circumstances in which an accountant's name is used in connection with the financial statements or an accountant has prepared the statements, even if the accountant's name is not used in any written report |
|
|
Term
|
Definition
| a general set of standards intended to guide attestation work in areas other than audits of financial statements |
|
|
Term
|
Definition
| specialized actions auditors take to obtain evidence in an engagement |
|
|
Term
|
Definition
| a list of the audit procedures that auditors need to perform to gather sufficient appropriate evidence on which to base their opinion on the financial statements |
|
|
Term
|
Definition
| audit quality guides that remain the same through time and for all audits |
|
|
Term
|
Definition
| auditors explicitly state that they give no opinion and no assurance on the fair presentation of the financial statements in accordance with GAAP |
|
|
Term
|
Definition
| a level of performance that would be exercised by reasonable auditors in similar circumstances; auditors are expected to possess the skills and knowledge of others in the profession and are not expected to be infallible |
|
|
Term
| engagement quality control review |
|
Definition
| an internal evaluation of the significant judgments made by the audit team and the conclusions reached in formulating its report |
|
|
Term
|
Definition
| the information used by auditors in arriving at the conclusion on which the audit opinion is based |
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|
Term
|
Definition
| documentary evidence obtained directly from independent external sources |
|
|
Term
| external-internal evidence |
|
Definition
| documentary evidence that has originated outside the client's information processing system but that has been received and processed by the client |
|
|
Term
| financial reporting framework |
|
Definition
| a set of criteria used to determine the measurement, recognition, presentation, and disclosure of material items in the financial statements |
|
|
Term
|
Definition
| standards that identify the requirements for the preparation and presentation of financial statements and accompanying footnote discoverers |
|
|
Term
| GAAS generally accepted auditing standards |
|
Definition
| standards that identify necessary qualifications and characteristics of auditors and guide the conduct of the audit examination |
|
|
Term
|
Definition
| auditors' mental attitude and impartiality with respect to the client |
|
|
Term
|
Definition
| an entity's capability to prevent or detect materiel accounting errors or frauds and provide for their correction on a timely basis |
|
|
Term
| management representations (or written representations) |
|
Definition
| written assertions provided by management to auditors on matters such as the fairness of an entity's financial statements, availability of all financial record and related data, internal control over financial reporting, and other specific representations about the financial statements and accounts |
|
|
Term
|
Definition
| a study of a firm's quality control policies and procedures, followed by a report on the quality of the firm's audit practice in according with its system of quality contort (conducted through AICPA and performed firm firms that do NOT audit public entities) |
|
|
Term
|
Definition
| a state of mind that is characterized by appropriate questioning and a critical assessment of audit evidence |
|
|
Term
| risk of material misstatement |
|
Definition
| the combined probability that a material misstatement (error or fraud) will occur and not be prevented or detected on a timely basis by the entity's internal controls |
|
|
Term
|
Definition
| situation in which auditors are unable too obtain sufficient evidence regarding the fairness of the entity's financial statements |
|
|
Term
| sufficiency (audit evidence) |
|
Definition
| sufficiency relates to the quantity of audit evidence (the number of transactions or components valuated) |
|
|
Term
|
Definition
| a "clean" report that makes no mention of accounting or auditing deficiencies |
|
|
Term
|
Definition
| responses to audit inquires provided by the client's officers, directors, owners, and employees |
|
|
Term
|
Definition
| consists of knowingly making material misrepresentations of fact, with the intent of inducing someone to believe the falsehood and act on it and, thus, suffer a loss or damage |
|
|
Term
|
Definition
| deliberate fraud committed by management that injures investors and creditors through materially misleading information; aka fraudulent financial reporting |
|
|
Term
| fraudulent financial reporting |
|
Definition
| intentional or reckless conduct, whether by act or omission, that results in materially misleading financial statements |
|
|
Term
|
Definition
| the misdeeds of operable who wear ties to work and steal with a pencil or a computer terminal |
|
|
Term
|
Definition
| the use of fraudulent means to misappropriate funds or other property from an employer |
|
|
Term
1. the faultiness act
2. the conversion of the funds or property to the fraudsters use
3. the cover up |
|
Definition
| three phases of employee fraud (categories - embezzlement/larceny) |
|
|
Term
|
Definition
| type of fraud involving employees or non employees wrongful misappropriating funds or property entrusted to their care, custody, and control, often accompanied by false accounting entries and other forms of deception and cover up |
|
|
Term
|
Definition
|
|
Term
|
Definition
| another name for employee fraud, embezzlement, and larceny ("misappropriation of assets") |
|
|
Term
|
Definition
| unintentional misstatements or omissions of amounts or disclosures in financial statements |
|
|
Term
| direct effect illegal acts |
|
Definition
| violations of laws or government regulations by the company or its management or employees that produce direct and material effects on dollar amounts in financial statements |
|
|
Term
1. the existence of red flags
2. the auditors' skill in noticing them and appropriately assessing the fraud risk
3. the audit team's willingness to follow them with fraud detection procedures |
|
Definition
| the performance of fraud detection procedures depends on : |
|
|
Term
assess the risk of material fraud
design audits to provide reasonable assurance of detecting management fraud and employee fraud that could have material effect on financial statements; report findings to management, directors, users of financial statements, and outside agencies |
|
Definition
| SAS 99 audit responsibilities |
|
|
Term
1. audit team discussion (brainstorming)
2. identify information necessary to assess fraud risk factors
3. identify and assess fraud risks
4. respond to risk assessment
5. evaluate audit evidence
6. communicate fraud matters
7. document fraud matters |
|
Definition
| steps to Considering the Risk of Fraud |
|
|
Term
|
Definition
| approximations of financial statement numbers |
|
|
Term
|
Definition
| less predictable audit procedures (ie surprise inventory observations) |
|
|
Term
|
Definition
| the crucial link of the evidence to the suspect (called "relevance of evidence" by attorneys) |
|
|
Term
| all companies with securities traded on the exchanges are required to have audit committees |
|
Definition
|
|
Term
|
Definition
| composed of independent, outside members of the board of directors who can provide a buffer between the audit firm and management |
|
|
Term
discussions of engagement personnel
procedures to identify and assess risk
specific risks identified and audit team responses
explanation of why improper revenue recognition is not a risk
results of procedures regarding management override
other conditions causing auditors to believe that additional procedures are required
communications to management and those charged with governance, such as the audit committee |
|
Definition
| documentation of fraud matters: |
|
|
Term
|
Definition
|
|
Term
direct effect illegal acts
indirect effect illegal acts |
|
Definition
| two types of illegal acts under SAS 54 |
|
|
Term
| direct effect illegal acts |
|
Definition
| produce direct and material effects on financial statement amounts which require the same assurance as errors and frauds |
|
|
Term
| indirect effect illegal acts |
|
Definition
| refer to violations of laws and regulations that are far removed from financial statement effects |
|
|
Term
|
Definition
| the probability that the information (including financial statements) distributed by an entity will be materially false and misleading as a result of errors, fraud, or direct effect illegal acts |
|
|
Term
|
Definition
| the risk of issuing an incorrect opinion on the financial statements (giving an unqualified audit opinion when unknown material misstatements actually exist) |
|
|
Term
|
Definition
| the probability than an audit team will express an inappropriate audit opinion when the financial statements are materially misstated |
|
|
Term
|
Definition
| the risk that (1) a material misstatement occurs/inherent risk (2) is not prevented or detected by client internal controls/control risk and (3) is not detected by the auditor's procedures/detection risk |
|
|
Term
|
Definition
| the likelihood than an error or fraud will enter the accounting information system |
|
|
Term
|
Definition
| the likelihood than an error or fraud will not be caught by the client's internal controls |
|
|
Term
|
Definition
| the likelihood that an error or fraud will not be caught by the auditor's procedures |
|
|
Term
|
Definition
| the likelihood that an error or fraud will occur and not be caught by either internal controls or auditor's procedures |
|
|
Term
|
Definition
| the probability that, in the absence of internal controls, material error or frauds could enter the accounting system used to develop financial statements |
|
|
Term
|
Definition
| the susceptibility of an account to misstatement |
|
|
Term
|
Definition
| the probability that the client's internal control policies and procedures will fail to prevent or detect material misstatemetns, provided any enter or would have entered the accounting system in the first palce |
|
|
Term
|
Definition
| the probability that audit procedures will fail to detect material misstatements, provided any have entered the accounting system in the first place and have not been detected an corrected by the client's internal controls |
|
|
Term
|
Definition
| the procedures used to detect material misstatements in dollar amounts and disclosures presented in the financial statements and footnotes |
|
|
Term
1. audit of the details of transactions and balances
2. analytical procedures applied to produce circumstantial evidence about dollar amounts in the accounts |
|
Definition
| two categories of substantive procedures |
|
|
Term
Audit Risk = inherent risk X control risk X detection risk
AR = IR X CR X DR |
|
Definition
|
|
Term
| risk of material misstatement |
|
Definition
| RMM; combination of inherent and control risk |
|
|
Term
| nature of the procedures (nature, timing and extent) |
|
Definition
| refers to audit procedures' overall effectiveness at detecting misstatements |
|
|
Term
| timing (nature, timing, and extent) |
|
Definition
| refers to when the audit procedures take place |
|
|
Term
| extent (nature, timing, and extent) |
|
Definition
| refers to the number of tests preformed |
|
|
Term
| there is no such thing as an "IMMATERIAL" fraud commuted by MANAGEMENT |
|
Definition
|
|
Term
| based on the allowable detection risk, auditors modify the nature, timing, and extent of their audit procedures |
|
Definition
|
|
Term
risk assessment procedures
tests of controls
produce evidence about management's assertions (substantive procedures) |
|
Definition
| three purposes of audit procedures |
|
|
Term
inspection of records and documents (vouching, tracing, scanning)
inspection of tangible assets
observation
inquiry
confirmation
recalculation
reperformance
analystical procedures |
|
Definition
| eight general audit procedures to gather evidence |
|
|
Term
|
Definition
| examining a document by follow an item of financial information from a journal or ledger back through the processing steps to its origin (ie the source documentation that supports the item selected) |
|
|
Term
|
Definition
| helps decide whether all recorded data are adequate supported (that it exists and occurred) |
|
|
Term
|
Definition
| examining documents by following its processing path forward to find its final recording in a summary journal or ledger |
|
|
Term
|
Definition
| helps decide whether all events were recorded (completeness assertion) |
|
|
Term
|
Definition
| requests a reply in all cases |
|
|
Term
|
Definition
| requests a reply only if the recipient considers the account balance to be incorrect |
|
|
Term
|
Definition
| evaluating financial statement accounts by studying and comparing relationships among financial and nonfictional data |
|
|
Term
|
Definition
| during what stages of the audit are analytic procedures required to be used? |
|
|
Term
|
Definition
| a list of the audit procedures that the audit team needs to perform to gather sufficient appropriate evidence on which to base their opinion on the financial statemnets |
|
|
Term
| internal control plans and substantive audit plans |
|
Definition
|
|
Term
| internal control audit plans |
|
Definition
| contain the specification of procedures for obtaining an understanding of the client's business and internal control and for assessing the inherent risk and the control risk related to the fiannial account balances and classes of transactions |
|
|
Term
|
Definition
| contain the specification of substantive procedures for gathering direct evidence on mgmt's assertions (ie existence, occurrence, completeness, cutoff, rights and obligations, valuation and allocation, accuracy, classifcation, understandablity) about amounts and dislcosures in the fianical statements |
|
|
Term
|
Definition
| a set of accounts that go together in an accounting system |
|
|
Term
|
Definition
| the largest amount of uncorrected dollar misstatement that could existing published financial statements while the statements would still fairly present the entity's financial position and results of operation sin conformity with the applicable accounting framework |
|
|
Term
|
Definition
| intended to enable auditors to conduct the work in accordance with auditing principles concerning the planning and supervision of the aduit, obtaining an understanding of the internal control, and obtaining sufficeint appropriate evidence to serve as a bsis for the audit report |
|
|
Term
|
Definition
| reasonableness tests used to gain an understanding of financial statement accounts and relationships |
|
|
Term
|
Definition
| a subset of a company's board of directors composed of outside members (those not involved in the day to day operations of the comany) who can provide a buffer between the faudit firm and managment |
|
|
Term
|
Definition
| a list of the audit procedures the auditors need to perform to gather sufficient appropriate evidence on which to base their opinion on the financial statments |
|
|
Term
|
Definition
| a set of balance sheet and income statement accounts that are related by their common usage in a business process |
|
|
Term
|
Definition
| a type of fraud involving employees or non employees wrongfully taking money or property entrusted to their care, custody, and control; often accompanied by false accounting entries and other forms of lying and cover - up |
|
|
Term
|
Definition
| unintentional misstatements or omissions of amounts or disclosures in financial statements |
|
|
Term
|
Definition
| audit procedures that are used in response to heightened fraud awareness as the result of identified fraud risks |
|
|
Term
| internal control audit plan |
|
Definition
| the specification of procedures for obtaining an understanding of the client's business and internal control and for assessng the control risk related to the financial account balances |
|
|
Term
to obtain or update an understanding of important events that have affected the client and its operations
to dientify areas of the engagement that could reprsent special risks to the firm
to ensure that the engagment can be completed in a timely fashion |
|
Definition
| three basic goals of engagement planning |
|
|
Term
|
Definition
| the primary reason for accepting or not accepting an audit engagement |
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Term
| Form 8-L, the special events report |
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Definition
| required whenever certain significant events occur such as changes in control and legal proceedings (change in auditors) |
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Definition
| the public accounting firm that has been terminated or has voluntarily withdrawn from the engagement whether the audit has been completed or not |
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Definition
| sets forth the understanding with the client, including the objectives of the engagement, management's responsibilities, the auditors' responsibilities, and any limitations of the engagement |
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Definition
| deals with the subject of future services; deals with access to audit documentation by successor auditors, resistance of the auditors' report when required for SEC reporting or comparative financial reporting, and fee arrangements for such future services |
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Term
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Definition
| when a concurring partner review the audit team's work in critical audit areas (high audit risk) |
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Term
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Definition
| used to maintain control of the audit by identifying problem areas early in the engagement, thereby ensuring that the engagement is completed on a timely basis; |
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Term
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Definition
| refers to procedures performed several weeks or months before the balance sheet date |
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Term
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Definition
| refers to procedures performed shortly before and after the balance sheet date |
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Term
| enterprise risk management ERM as defined by COSO |
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Definition
| a process, effected by an entity's board of directors, management and other personnel, applied in strategy setting and across the enterprise, designd to identify potential events that may affect the entity, and manage risks to be within its risk appetite, to provide reasonable assurance regarding the e ahcievement of entity boejctives |
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Term
internal environment
objective setting
event identification
risk assessment
risk response
control activities
informaton and acommunicatino
monitroing |
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Definition
| 8 elements of the ERM model |
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Term
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Definition
| element of ERM that is the risk consciousness of the organization (risk ap petite, integrity, management philosophy, environment in which it operates); establishes how the organization responds to risk |
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Term
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Definition
| erm element that is mgmt's responsibility to determine the goals and objectives of the organization |
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Term
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Definition
| the erm element that is the identification of conditions and events, either internal or external to the organiation, that could adverseely affect managements objectives |
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Definition
| erm element that is the systematic process for estimating the likelihood of adverse conditions occurring |
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Definition
| erm element that addresses how the organization will prevent/respond to the adverse conditions if they actually occur |
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Definition
| ERM element that are policies and procedures to ensure that risk responses are appropriate given the circumstances and environment in which the organization operates |
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Term
| information and communication |
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Definition
| links all components of the ERM |
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Term
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Definition
| ERM element which includes regular mgmt and supervisory activities over risk management activities |
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Term
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Definition
| the audit team views all activities in the organization first in terms of risks to strategies/objectives and then in terms of mgmt's plans/processes to mitigate the risks |
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Term
avoid it
control it
share it |
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Definition
| three basic ways mgmt can mitigate a risk |
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Term
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Definition
| include those individuals or organizations that are closely tired to the auditee, possibly thru family ties or investment relationships |
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Term
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Definition
| reasonableness tests; comparing estimates of account balances with those recorded by mgmt |
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Term
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Definition
| analytical procedures must be applied in what stages of each audit? |
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Term
1. develop an expectation
2. define a significant different
3. compare expectation with the recorded amount
4. investigate significant differences
5. document each of the preceding steps |
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Definition
| five steps when creating analytical procedures: |
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Term
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Definition
| calculate year to year changes in balance sheet and income statement accounts |
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Term
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Definition
| common size statements in which financial statement amounts are expressed as percentages of a base |
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Term
at the beginning of the audit (planning stage)
and
at the end of the audit when the partners in charge review the quality of the work |
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Definition
| when are analytical procedures required? |
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Term
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Definition
| an amount less than materiality for the financial statements as a whole |
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Term
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Definition
| persons skilled in fields other than accounting/auditing who are not members of the audit team |
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Term
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Definition
| a chain of evidence provided through coding, cross references, and documentation connecting account balances and other summary results with the original transaction source documents |
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Term
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Definition
| the written record of the basis for the auditor's conclusions that provides the support for the auditor's representations, whether those representations are contained in the auditor's report or otherwise |
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Term
permanent files
current files |
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Definition
| two categories of audit documentation |
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Term
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Definition
| audit documentation which contain information that is relevant to ongoing client relationships |
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Term
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Definition
| audit documentation which relate to just one year of the client relationship |
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Term
| permanent files/continuing audit files |
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Definition
| contain information of continuing audit significance over many years' audits of the same client |
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Term
| engagement administrative files and audit documentation files |
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Definition
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Term
| engagement administrative files |
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Definition
| contain the documentation of the early planning phases of the audit (engagement letter, results of preliminary analytical procedures..) |
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Term
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Definition
| summarizes engagement administrative files |
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Term
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Definition
| summarizes all important overall planning information and documents that the audit team is following generally accepted auditing standards |
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Term
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Definition
| a list of the audit procedures to be performed by the audit team to gather sufficient appropriate evidence on which to base their opinion on the financial statements |
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Term
| current year audit documentation files |
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Definition
| contain the specific assertions under audit, the record of the procedures performed, the evidence obtained, and the decisions made in the course of the audit |
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Term
| show the auditors' conclusions |
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Definition
| the most important facet of the current audit evidence documentation files |
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Term
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Definition
| a summary of the accounts or components in an account group |
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Term
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Definition
| each audit document is given an index number so it can be found, removed, and replaced without loss |
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Term
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Definition
| numbers or memorandum related to other audit documents carry the index of the other documents so the connections can be followed |
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Term
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Definition
| each audit document is titled with the name of the company, the balance sheet date, and a descriptive title of the contents of the document |
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Term
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Definition
| AS 3 requires that audit documentation be retained for how many years following the conclusion of the engagement? |
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Term
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Definition
| according to PCAOB regulations, all documentation must be finalized within how many days of the audit report's release date? |
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Term
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Definition
| reasonableness tests used to gain an understanding of financial statement accounts and relationships |
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Term
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Definition
| the written basis for the auditor's conclusions |
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Term
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Definition
| the chain of evidence provided thru coding, cross references, and documentation connecting account balances and other summary results with the original transaction source documents |
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Term
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Definition
| second audit partner on the audit team; required for audits of financial statements filed with the SEC; review the audit team's work in critical audit areas |
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Term
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Definition
| the special events report filed with the SEC whenever certain significant corporate events occur such as changes in control, legal proceedings, and changes of auditor |
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Term
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Definition
| document summarizing the preliminary analytical procedures and the materiality assessment with specific directions about he effect ton the audit |
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Term
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Definition
| the public accounting firm that has been terminated or has voluntarily withdrawn from an audit engagement (whether the audit has been completed or not) |
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Definition
| the branch of philosophy which is the systematic study of reflective choice, of the standards of right and wrong by which it is to be guided, and of the goods toward which it may ultimately be directed |
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Term
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Definition
| exists when an individual must make a choice among alternative actions and the right choice is not absolutely clear |
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Term
| ethical problem situation |
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Definition
| problem situation in which the choice of alternative actions affects the well being of other persons |
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Term
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Definition
| makes explicit some of the criteria for conduct unique to the profession |
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Term
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Definition
| directs a decision maker to act according tot he requirements of an ethical rule |
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Term
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Definition
| a function of moral rules and principles and does not involve a situation specific calculation of the consequences |
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Term
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Definition
| advocated by Kant; maintains that reason and the strict duty to be consistent should govern actions; "act only as everyone should act all the time"; unconditional obligation |
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Term
| principle of utilitarianism |
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Definition
| emphasizes examining the consequences of action rather than following some rules |
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Term
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Definition
| the center of attention is the individual act as it is affected by the specific circumstances of a situation |
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Term
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Definition
| emphasizes the centrality of rules for ethical behavior while still maintaining the criterion of the greatest universal good |
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Term
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Definition
| considers the consequences of a decision made by similar persons action under similar circumstances (combination of imperative and utilitarian) |
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Term
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Definition
| emphasis on an individual act as it is affected by the specific circumstances of a situation |
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Term
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Definition
| Kant's specification of an unconditional obligation, to act as one thinks others should act regardless of circumstances |
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Term
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Definition
| a percentage fee charged for professional services in connection with executing a transaction or performing some other business activity |
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Term
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Definition
| a fee established for the performance of any service in an arrangement in which no fee will be charged unless a specific finding or result is attained or the fee otherwise depends on the result |
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Term
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Definition
| a judicious combination of the imperative and utilitarian principles, to act as one thinks others should act in a similar circumstance |
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Definition
| a mental attitude and appearance that the auditor is not influenced by others in judgments and decisions |
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Term
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Definition
| fees a CPA receives for recommending another CPA's services and fees a CPA pays to obtain a client (may or may not be based on a percentage of the amount of any transaction) |
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Definition
| emphasis on the centrality of rules for ethical behavior while still maintaining the criterion of the greatest universal good |
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Definition
| quality control review and disciplinary actions conducted by fellow CPA's-professional peers |
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Term
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Definition
| given the responsiblity to set public accounting firm standards and to oversee quality control, ethics, and independence issues for accounting professsionals who audit fianncial statmenets of public companies |
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Term
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Definition
| the aicpa committee that makes and enforces all rules of conduct for CPA's who are AICPA members |
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Term
responsibilities
the public interest
integrity
objectivity and independence
due care
scope and nature of services |
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Definition
| principles of professional conduct |
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Term
| independence, integrity and objectivyt |
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Definition
| section 100 of the aicpa rules of conduct |
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Term
| general and technical standards |
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Definition
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Term
| responsibilities to clients |
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Definition
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Term
| other resonsibilites and practices (acts discreditable, dcommissions, advertising, form of practce and name) |
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Definition
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Term
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Definition
| the mental attitude and appearance that auditors are not influenced by others in making judgments and decisions, by avoiding financial connections that make it appear that the auditor's wealth depends on the outcome of the audit and avoiding managerial connections that make it appear that the auditors are involved in managment decisions for the audit client |
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Term
familiarity threat (spuse in client pos)
adverse interst threat (suing clients)
undue influence threat (accepting gifts)
self review threat (reviewing own work)
financial self interest threat
mgmt participation threat
advocacy threat (promoting clients pos) |
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Definition
| identified threats to independence |
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Term
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Definition
| a mental state of objectivity and lack of bias |
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Definition
| depdns o nwhether a reasonalb einvestor, with knowledge of all relevant facts and circumstances, can conclude that the auditor is not capable of exercisiong objective and impartial judgment |
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Term
professional competence
due professional care
planning and supervision
sufficient relevant data |
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Definition
| rule 102/ general standards |
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Term
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Definition
| a fee established for the performance of any service in an arrangement in which no fee will be charged unless a specific finding or result is attained or the fee otherwise depends on the result of the service |
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Term
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Definition
| a percentage based fee charged for professional services in connection with executing a transaction or performing some other business activity |
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Term
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Definition
| fees a CPA recievers for recommending another CPA's services and fees a CPA pays to obtain a client |
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Term
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Definition
| the quality control reviiews and disciplinary actions conducted by fellow CPAs- professional peers |
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Term
| must assess control risk twice, during planning and during interim |
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Definition
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