Becker Vocab

Question 1

Agreed-Upon Procedures

Answer 1

An attestation engagement in which a practitioner performs specific procedures on underlying subject matter or subject matter information and reports the findings without providing an opinion or conclusion.

Question 2

Allowance for Sampling Risk

Answer 2

In sampling, a “cushion” for protection against undetected deviations that is added to the sample deviation rate to arrive at the upper deviation rate.

Question 3

Analytical Procedures

Answer 3

Evaluations of financial information made by a study of plausible relationships among both financial and nonfinancial data.

Question 4

Appropriate (Appropriateness of Audit Evidence)

Answer 4

The measure of the quality (both relevance and reliability) of audit evidence in providing support for auditor conclusions.

Question 5

Assertion-Based Examination

Answer 5

An attestation engagement in which the practitioner obtains reasonable assurance by obtaining evidence about the responsible party’s measurement or evaluation of the underlying subject matter against criteria in order to be able to draw reasonable conclusions about whether the subject matter is in accordance with (or based on) the criteria or the responsible party’s assertion is fairly stated.

Question 6

Association With Financial Statements

Answer 6

A relationship that arises when an accountant consents to the use of his or her name in connection with financial statements, or when an accountant has prepared the financial statements.

Question 7

Assumption of Responsibility

Answer 7

A situation in which the group engagement partner decides to assume responsibility for the work performed by a component auditor, and therefore does not refer to the component auditor in the auditor’s report.

Question 8

Attest Engagements

Answer 8

An engagement in which a practitioner is engaged to issue or does issue an examination, a review, or an agreed-upon procedures report on subject matter, or on an assertion about the subject matter, that is the responsibility of another party.

Question 9

Attestation Risk

Answer 9

In an examination or review attest engagement, attestation risk is the risk that the practitioner expresses an inappropriate opinion or conclusion, respectively, when the subject matter information or assertion is materially misstated.

Question 10

Attribute Sampling

Answer 10

A statistical sampling method used to estimate the rate of occurrence of a specific characteristic or attribute in a population.

Question 11

Attributes of Risk

Answer 11

Four characteristics used in analyzing risk: type, significance, likelihood, and pervasiveness

Question 12

Audit Data Analytics

Answer 12

ADAs involve analyzing patterns, identifying anomalies, and extracting other useful information in data underlying or related to the subject matter of an audit through analysis, modeling, and visualization.

Question 13

Audit Evidence

Answer 13

The underlying information used by the auditor in reaching audit conclusions. The information corroborates or contradicts assertions in the financial statements.

Question 14

Audit Risk

Answer 14

The risk that an auditor may unknowingly fail to modify appropriately the opinion on financial statements that are materially misstated.

Question 15

Audit Risk of Noncompliance

Answer 15

The risk that the auditor may unknowingly fail to appropriately modify the opinion on compliance in a compliance audit. It comprises the risk of material noncompliance and detection risk of noncompliance.

Question 16

Bias Threat

Answer 16

The threat that an auditor will, as a result of political, ideological, social, or other convictions, take a position that is not objective.

Question 17

Bill of Lading

Answer 17

A shipping document issued by a carrier evidencing receipt of goods and terms of transport.

Question 18

Brainstorming

Answer 18

An open exchange of ideas; required during planning as a means of evaluating the potential for material misstatement due to fraud.

Question 19

Capsule Financial Information

Answer 19

Unaudited summarized interim information for subsequent periods.

Question 20

Classification and Understandability

Answer 20

A financial statement assertion in the “transactions and events” category indicating that financial information is appropriately presented and described and disclosures are clearly expressed.

Question 21

Combined Approach

Answer 21

An audit approach in which both tests of the operating effectiveness of controls and substantive procedures are used. If controls are operating effectively, less assurance will be required from substantive procedures.

Question 22

Common Size Financial Statements

Answer 22

Restated financial statements in which each balance sheet component is expressed as a percentage of total assets, and each income statement component is expressed as a percentage of total revenue.

Question 23

Completeness

Answer 23

A financial statement assertion appearing in all three assertion categories and indicating that all transactions, events, assets, liabilities, and equity interests that should have been recorded have been recorded, and that all disclosures that should have been included in the financial statements have been included.

Question 24

Compliance Audit

Answer 24

An attest engagement under GAAS (and sometimes GAGAS) in which the auditor reports on whether the entity or compliance audit client(s) complied, in all material respects, with the compliance requirements applicable to its programs. Additional Single Audit Act requirements may apply.

Question 25

Components of Internal Control

Answer 25

Interrelated elements of the system of internal control used to achieve an entity’s objectives; control components consist of: CRIME

C= control environment,
R= risk assessment,
I= information and communication systems,
M= monitoring, and
E= (existing) control activities.

Question 26

Concurring Approval of Issuance

Answer 26

Approval of the issuance of the engagement report granted by the engagement quality reviewer under PCAOB standards. A firm cannot give an issuer permission to use the engagement report until concurring approval of issuance has been granted.

Question 27

Condensed Financial Statements

Answer 27

Historical financial information that is presented in less detail than a complete set of financial statements, in accordance with an appropriate financial reporting framework.

Condensed financial statements may be separately presented as unaudited financial information or may be presented as comparative information.

Question 28

Confidence Level (also called Reliability)

Answer 28

In sampling, a measure of how certain the auditor wants to be that his or her results are accurate. Note that the confidence level plus the risk of being ineffective equals 100 percent.

Question 29

Contingent Fee

Answer 29

A fee established for performing services when no fee is charged unless a specific finding or result is obtained, or the fee amount is dependent upon the finding or result obtained.

Question 30

Control Activities

Answer 30

The policies and procedures that help ensure that management directives are carried out and that necessary steps are taken to address risks.

Question 31

Control Deficiency

Answer 31

A weakness that exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis.

Question 32

Control Environment

Answer 32

The tone of an organization, including management attitude, participation of those charged with governance, organizational structure, and human resource policies.

Question 33

Control Risk

Answer 33

The risk that a material misstatement that could occur in an assertion will not be prevented or detected on a timely basis by the entity’s system of internal control.

Question 34

Control Risk of Noncompliance

Answer 34

The risk that noncompliance with a compliance requirement that could be material will not be prevented or detected on a timely basis by an entity’s system of internal control.

Question 35

Controlled Processing

Answer 35

A form of parallel simulation in which the auditor observes an actual processing run and compares the actual results to the expected results based on the auditor’s own program.

Question 36

Controlled Reprocessing

Answer 36

A form of parallel simulation in which the auditor uses an archived copy of the program in question (generally the auditor’s control copy) to reprocess transactions. The results are then compared with the results from the normal processing run.

Question 37

Critical Audit Matters

Answer 37

Those matters arising from the current period audit of the financial statements that are communicated or required to be communicated to the audit committee and that relate to accounts or disclosures that are material to the financial statements and involve especially challenging, subjective, or complex auditor judgment.

Question 38

Cutoff

Answer 38

A financial statement assertion in the “transactions and events” category indicating that transactions and events have been recorded in the correct accounting period.

Question 39

Cutoff Testing

Answer 39

An examination of transactions occurring several days before and several days after year-end, to ensure that they were recorded in the proper accounting period.