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Chapter 9
External Auditors' Roles and Responsibilities
20
Accounting
Graduate
04/02/2012

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Term
Auditor independence
Definition
Freedom from those pressures and other factors that compromise, or can reasonably be expected to compromise, an auditor’s ability to make unbiased and objective audit decisions.
Term
Audit quality
Definition
The likelihood that the auditor discovers a material misstatement due to error or fraud and discloses the misstatement in an audit report designed to lend credibility to published financial statements and to protect investors from receiving misleading audits.
Term
Audit risk
Definition
Risk of the auditor expressing an inappropriate opinion on the financial statements.
Term
Audit strategy
Definition
The most efficient strategy to produce the best audit quality by identifying activities that represent significant emerging business risks or opportunities for the organization.
Term
Control risk
Definition
Risk that a material misstatement in the unaudited information will not be detected or corrected by the management’s internal control procedures on a timely basis.
Term
Detection risk
Definition
The risk that a material misstatement in the unaudited information will not be detected by the auditor.
Term
Expectation gap
Definition
The perceived difference between what society expects from auditors and what auditors are willing and able to assume as responsibility in compliance with their professional standards.
Term
Inherent risk
Definition
Risk of a material misstatement in the unaudited information assuming the absence of internal control procedures.
Term
Integrated audit approach
Definition
Combined audit of both internal controls and financial statements.
Term
Internal Revenue Service (IRS)
Definition
The federal agency responsible for administering and enforcing all internal revenue laws in the United States.
Term
International Standards on Auditing (ISAs)
Definition
International auditing standards issued by the IAASB.
Term
Investigation and Discipline Board (AIDB)
Definition
An independent investigative and disciplinary body for accountants in the United Kingdom.
Term
PCAOB-US
Definition
A private-sector nonprofit organization that oversees auditors of public companies to protect the interests of investors and further the public interest in preparation of fair, informative, and independent reports by issuing auditing and attestation standards as well as ethics and independence rules.
Term
Professional Ethics Executive Committee (PEEC)
Definition
A senior technical committee of AICPA that promotes public awareness and confidence in the integrity, objectivity, and professionalism of its members.
Term
Standing Advisory Group (SAG)
Definition
Advises the PCAOB on the establishment of auditing and related professional practice standards.
Term
Statements on Auditing Standards
Definition
Promulgated by the Auditing Standards Board of the AICPA to provide guidance to auditors on generally accepted auditing standards.
Term
PCAOB Auditing Standard No. 1
Definition
(audit is conducted in accordance with auditing standards of PCAOBUS, the city and state has to be disclosed)
Term
PCAOB Auditing Standards No. 2 and 5
Definition
requires the independent audit to opine only on the effectiveness of ICFR, not the management processes and assessments concerning ICFR
Term
PCAOB Auditing Standard No. 3
Definition
auditors are required to maintain the audit documentation is sufficient manner and keep the records for at least seven years
Term
PCAOB Auditing Standard No. 4
Definition
voluntarily engagement for the auditor’s report on the company’s elimination of previously reported material weaknesses in its ICFR
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