Term
| Independent Audit Function - Responsibilities |
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Definition
Company's Management = Financial Statements
Auditors = Expression of Opinion ("Audit Function") |
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Term
| Auditor Findings - Primary Assertion |
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Definition
| Whether the statements are "presented fairly" in accordance with GAAP (Generally Accepted Accounting Principles) |
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Term
| Generally Accepted Auditing Standards (GAAS) |
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Definition
Auditor is responsible for the performance of properly planned and executed audits.
Compliance with GAAS is mandatory on all audit engagements. |
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Term
| The Public Company Accounting Oversight Board (PCAOB) |
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Definition
- Establishes practice standards to be used in the preparation and issuance of audit reports of "issuers"
- "Issuers" are entities subject to the rules of the SEC (public companies)
- Public accounting firms must register with the PCAOB in order to audit a public company.
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Term
| The Sarbanes-Oxley Act (SOX) |
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Definition
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Term
| Statement on Auditing Standards (SASs) - Specific Language used to clarify Auditor's Level of Responsibility |
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Definition
- 'Must' or 'Required' - unconditional requirement, must always be followed
- 'Should' - presumptively mandatory requirement, must always be considered
- 'May', 'Might' and 'Could' - explanatory material that does not impose professional requirement
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Term
| GAAS Standards - The General Standards |
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Definition
- T - Training - adequate technical training
- I - Independence
- Independent in Fact and Appearance
- P - Professional Care
- what the auditor does and how well it is done
- obtain sufficient appropriate evidence to limit audit risk to a low level
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Term
| GAAS Standards - The Standards of Fieldwork |
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Definition
- P - Planning & Supervision
- I - Internal Control, Entity and Environment
- Strong Controls imply the auditor will require less evidence
- Weak Controls imply the auditor will require more evidence
- Weak internal control ≠ Adverse Opinion, just more work
- E - Evidence
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Term
| GAAS Standards - The Standards of Reporting |
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Definition
- A - Accounting = GAAP
- Explicit statement in auditor's report
- Opinion MUST state
- C - Consistency
- Implicit in auditors report
- Silence is ok
- D - Disclosure
- Implicit in auditor's report
- Silence is ok
- O - Express Opinion
- Explicit statement in auditor's report
- Opinion must state
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Term
| Explicit Auditing Standards |
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Definition
- A - Accounting = GAAP
- O - Express Opinion
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Term
| Implicit Auditing Standards |
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Definition
- C - Consistency
- D - Disclosure
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Term
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Definition
- Prevents misinterpretation of auditor's responsbility
- Auditor may express unqualified opinion on one financial statement (different opinions is ok)
- Auditor may report on one basic financial statement and not others (Limited Reporting Engagement)
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