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Audit

Aduti

TermDefinition
adverse Opinion opinion issued when the auditors conclude that that financial statements DO NOT PRESENT the financial condition, results of operations, and cash flows in CONFORMITY WITH GAAP.
associated (association) with financial stmts cases when auditors consent to the use of their name in some form of communication containing the entity's financial statements or submit to their clients or (3rd party users) financial statements they have prepared or assisted in preparing. Auditors shou
audi-tee company or other entity whose financials stmts are being audited.
circumstance-imposed scopre limitation a restriction on auditors from gathering sufficient appropriate evidence because of the client's deliberate refusal to provide them access to document or to otherwise limit the auditors' application of auditing procedures.
component auditor the auditor who audits divisions, subsidiaries, or components that are included in the group of financial statements
date of the auditors report the date on which auditors have obtained sufficient appropriate evidence to support their opinion.
departure from GAAP situation in which entity DOES NOT FOLLOW GAAP in preparing it finan stmts. Auditors can issue qualified or adverse opinions for material departures from GAAP
disclaimer of opinion issued auditors DO NOT EXPRESS AN OPINION on fairness fina stmts.Disclaimers of opin issued for pervasive going concern uncertainties, pervasive scope limitations, situations which auditor's are assoc with fina stmts & situation auditors not independent
division of responsibility situation in which the component auditors are involved with the examination of subsidiary, branch, component, or investment that is included in the financial stmts audited by group auditors
emphasis-of-matter paragraph a paragraph added to an auditors' report that providers information fundamental to users' understanding of financial stmts (such as consistency, going-concern uncertainties, or justified departures from GAAP)
explanatory paragraph a paragraph added to auditors report that either provide info fundamental to users' understanding of find stmts (emphasis-of-matter) or relevance to user's understanding of audit, auditor's responsibility, or auditor's report (other-matter-paragraph)
going-concern uncertainty situation in which questions are raised about an entity's ability to cont. opera. and meet its obligation as they become due
group auditors principle auditors, these perform the audit of material portion of assets, liabilities, revenues, and expenses of an entity's group financial statements.
group financial statements the financial statements of more than on component (division, subsidiary, or other segment)
integrated report a single report issued by auditors expressing their opinion on the fairness of fina stmts and effectiveness of int. cont. over fina rptg
internal control paragraph paragraph in auditor's report tha refers to the auditors report on the effectiveness of the entity's internal control over fina rptg
introductory paragraph paragraph in auditor's report that refer to auditors report stmts examined by auditors and the responsibility of auditors and mngt with respect to financial stmts
justified departure from GAAP situation in which an entity does DOES NOT FOLLOW GAAP in preparing its fina stmts because use of GAAP would result in materially misleading fina stmts. If auditors agree with departure, an unqualified opinion is issued
mitigating factos elements of fin an flexibility (salability of assets, lines of credit, debt extension, dividend elimination) available as survival strategies in circumstances of going-concern uncertainty that my reduce fin an difficulty problems
modified opinion any opinion other than an unqualified opinion on an entity's fin an stmts (qualified, adverse opinion, or disclaimer opinion)
opinion paragraph a paragraph in auditor's report that expresses auditors opinion on whether the finan stmts are presented in conformity with GAAP
other-matter paragraph a paragraph added to the auditor's report that expresses the auditors' opinion on whether the financial stmts are presented in conformity with GAAP
qualified opinon issued when auditors conclude that, with the EXCEPTION of one or more issues(s), the financial stmt present the finan condition, results of opera., and cash flows in conform with GAAP. Issued for material departures from GAAP & mater scope limitations
reissued report copy of previously-issued report that auditors provide or gran clients permission to use in another document after its original date; REPORT NOT MODIFIED to consider events occurring subsequent to date of original rpt
report on financial statements and related disclosures report prepared by auditors that expresses an opinion on whether entity's finan stmts and disclosure are prepared and present in conformity with GAAP
report on internal control over financial reporting (prepared by auditors) report that expresses an opinion on whether the entity's finan stmts & disclosures are prepared in conformity with GAAP
report on internal control over financial reporting (prepared by management) report that expresses an opinion on effectiveness of entity's internal control over financial reporting
scope limitation situation in which auditors are unable to obtain sufficient appropriate evidence. If material, a scope limitation results in the issuance of either qualified opinion or disclaimer of opinion
scope paragraph paragraph in the auditor's report indicating that the engagement was performed in accordance with the standards of PCAOB and provides general description of an audit
unqualified opinion issued when the auditors conclude that the financial stmts present the financial condition, results of operations, & cash flows IN CONFORMITY WITH GAAP
updated report auditor's report on prior-year finan stmts that is based on both the prior-year audit and information that has come to the auditors' attention in the most recent audit
agreed-upon procedures method used in an engagement in which users (clients) participate in determining the scope procedures performed by the accountants
appropriate financial reporting framework finan rptg treatment (GAAP, IFRS) adopted by mngt & when appropriate, those charged with governance in preparation of fina stmts that is acceptable in view of nature of entity & obj. of fina stmts or required by law/regulation
assurance services independent professional functions that improve quality of information or its context for decision makers
attestation acctg service resulting in rpt on subject matter or an assertion about subject matter that is responsibility of another party
cash basis framework special purpose framework that include no accruals
compilation acctg service in which practitioner assists in assembling information that is representation of mngt but provides no assurance
examination an attestation engagement similar to nature to an audti
eXtensible Business Reporting Language (XBRL) communication terminology required by Securities & Exchange commission for companies to use to provide fin an stmts info that has a computer-readable engagement identifying tag for each individual item of data
financial forecast prospective financial information reflecting an entity's estimates of what is LIKELY to occur in a future period
financial projection prospective financial information reflecting a transaction or event that may occur in the future
interim financial information refers to financial info or stmts covering a period less than a full year or for a 12-month period ending on a date other than entity's fiscal year end
management's discussion and analysis a required section of financial reports of public companies in which mngt analyzes the rests of operations and cash flows for the periods presented
modified cash basis accounting special purpose framework that provides limited accruals for items such as fixed assets and/or inventories and long-term debt
pro forma description of financial information reflecting historical data as if a certain transaction had occurred
responsible party person/persons, either as individual or representatives of entity, responsible for the subject matter of an attestation engagement
review engagement in which a practitioner provides limited assurance about financial information
review evidence evidence required to provide limited assurance obtained by (1) inquiring of management, (2) conducting analytics procedures, and (3) obtaining written representations form management
service organization an organization or segment of it that provides services to user entities that are likely to be relevant to user entities' internal controls as it relates to finan rptg
special purpose framework coherent acctg framework in which substantially all important finan measurements are governed by criteria other than GAAP or IFRS
sustainability triple-botton-line of economic viability, social responsibility, and environmental responsibility
SysTrust Services assurance function that reviews entity's computer system to provide confidence to busi partners & customers concerning security, privacy & confidentiality of info in addition to system availability & processing integrity
trust service set of professional attestation & advisory functions baser on a core set of principles & criteria that addresses the risk & opportunities of IT-enables systems and privacy programs
WebTrust Services assurance function designed to reduce the concerns of Internet susers regarding existence of a company & reliability of key business information placed on its website
act-utilitarianism (in moral philosophy): The emphasis on an individual act a it is affected by the specific circumstances of a situation
categorical imperative (in moral philosophy): Kant's specification of an unconditional obligation to act as one thinks others should act regardless of circumstances
commission % fee charged for professional services in connection with executing transaction or performing some other business activity
contingent fee type of compensation established for the performance of any service in an arrangement in which no amount will be charged unless a specific finding or result is attained or the fee otherwise depends on the result
covered member AICPA Code of Conduct, any indiv might be position 2 compromise integrity of audit. 1 on audit engagement team, 2 in position to influence audit engagement, 3 partner/mnge non audit client service team, 4 partner from local office of pub. acctg firm
generalization argument (in moral philosophy): judicious combination of the imperative and utilitarian principles; to act as one thinks others should act in a similar circumstance
independence mental attitude & the appearance that auditor is not influenced by others in judgements & decisions
referral fee the (1) compensation that a CPA receives for recommending another CPA's services & (2) that a CPA pays to obtain a client; may or may not be based on a % of amount of any transaction
rule-utilitarian (in moral philosophy): The emphasis on the centrality of rules for ethical behavior while still maintaining the criterion of the greatest universal good
self-regulating quality control reviews & disciplinary actions conducted by fellow CPAs-professional peers
allowance for sampling risk (precision) numeric distance from the estimated population value in which the true (but unknown) population value may lie with a given probability; used to adjust sample estimate to control exposure to sampling risk
attributes sampling a form of selection used to determine the extent to which some characteristics (attribute) occurs within a population of interest; used by auditors during test of controls
audit risk likelihood that auditors will unknowingly fail to modify their opinion on finan stmts that are materially misstated
audit sampling the application of an audit procedure to less than 100% of the items within an acct balance or class of trans. for the purpose of evaluating some characteristic of the balance/class
audited balance amount which an account balance or component should be recorded, assuming no departures form the appropriate reporting framework (GAAP/IFRS)
audited value (audited balance) amount which an account balance or component should be recorded, assuming no departures form the appropriate reporting framework (GAAP/IFRS)
block selection method of choosing sample items in which a series of contiguous (or adjacent) items is chosen from the population
classical variable sampling an approach that uses the laws of probability and the central limit theorem to provide an estimate of either the amount of misstatement or the true balance of an account balance/class transaction
confidence level (reliability) likelihood that the true population value lies within the precision interval
detection risk likelihood that the auditors' substantive procedures will fail to detect a material misstatement that exist within an account balance or class of transaction
dual-purpose test audit procedure used as both a test of controls and substantive test
haphazard selection method of selecting sample items in an unstructured manner but without any intentional bias
monetary unit sampling (MUS) approach that provides auditors an estimate of the amount of misstatement in account balance/class of transactions; tends to select higher value transaction/(component) within an account balance for examination
non-representative sample example that differs substantially from the population on one or more key characteristics of interest from which it is drawn
non-sampling risk likelihood that an incorrect conclusion will be reached because of reasons unrelated to sampling risk
non-statistical sampling plan that does not apply the laws of probability to choose representative items for examination & evaluate the results; does not allow an individual to control exposure to sampling risk
population entire group of items about which a conclusion is desired in a sampling applicatio
precision (sampling risk) likelihood that the decision made based on the sample will differ from decision that would have been made if the entire population by the necessary sample size
precision interval a range around the sample estimate that has a retain likelihood (equal to reliability) of including the true population value
random selection method of choosing sample items so that every combination of some number of items in population has an equal probability of being chosen
rate of deviation proportion at which internal control activities are not functioning as intended
reliability (confidence internval) likelihood that the true population value lies within the precision interval
risk of assessing control risk too high (risk of underreliance) likelihood that the auditors' sample will provide evidence that the client's controls are not functioning effectively when they are functioning effectively
risk of assessing control risk too low (risk of overreliance) likelihood that the auditors' sample will provide evidence that the client's controls are functioning effectively when they are functioning effectively
risk of incorrect rejection likelihood that auditors will conclude that the client's account balance is fairly stated when it is materially misstated
risk of overreliance (risk of assessing control risk too low) likelihood that the auditors' sample will provide evidence that the client's controls are functioning effectively when they are functioning effectively
risk of underreliance (risk of assessing control risk too high) likelihood that the auditors' sample will provide evidence that the client's controls are not functioning effectively when they are functioning effectively
sample subset of items drawn from a population of interest
sample estimate of misstatement difference between the recorded account balance and the audited account balance
sampling process of making a statement about a population of interest based on examining only a subset (or sample) of that population
sampling interval In a sequential process, the frequency with which items are selected within the population; determined by dividing the number of items in the population by the necessary sample size
sampling risk the likelihood that the decision made based on the sample will differ from the decision that would have been made if the entire population had been examined
standard deviation (standard error of the mean) measure of the variability of the population
standard error of the mean (standard deviation) measure of the variability of the population
statistical sampling a plan that applies the laws of probability to select items for examination and evaluated the results; allows an individual to control the exposure to sampling risk
systematic random selection (systematic selection) method of choosing sample items in which a starting point is selected and a fixed number of items are bypassed between selections
systematic selection (systematic random selection) method of choosing sample items in which a starting point is selected and a fixed number of items are bypassed between selections
tolerable misstatement maximum amount by which an account balance or class of transactions can be misstated and be accepted by the audit team as being fairly presented
tolerable rate of deviation (TRD) maximum proportion of variability the audit team allows without modifying the planned reliance on an internal control policy or procedure
unrestricted random selection (random selection) method of choosing items in which all items in the population are assigned a number and selected based on random numbers picked from a random number table or generated from a computer program
upper limit on misstatement (ULM) amount that has (1-risk of incorrect acceptance) probability of equaling or exceeding the try amount of misstatement in the population
upper limit rate of deviation (ULRD) measure that adjust the chosen proportion of variability for the audit team's acceptable level of sampling risk; the proportion that has a (1-risk of overreliance) probability of equaling or exceeding the try population rate of deviation
variable sampling form of examination used to examine a population to estimate the amount or value of some characteristic of that population; used by auditors during substantive procedures
Created by: edna1118