Chapter 2 - Vocabulary Flashcards Preview

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Flashcards in Chapter 2 - Vocabulary Deck (25):
1

American Institute of Certified Public Accountants (AICPA)

The body charged with establishing auditing standards for the auditing of non public entities through the Statements of Auditing Standards (SAS's) issued by the Auditing Standards Board (ASB).

2

Audit Plan

A list of the audit procedures auditors need to perform to gather sufficient appropriate evidence on which to base their opinion on the financial statements.

3

Audit Procedures

The specialized actions auditors take to obtain evidence in an engagement.

4

Auditing standards

The audit quality guides that apply to all audits.

5

Control Risk

The probability that a material misstatement (error or fraud) will not be prevented or detected on a timely basis by the entity's internal controls.

6

Detection Risk

The risk that the audit team's substantive procedures will fail to detect material misstatement.

7

Due Care

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 their profession and are not expected to be infallible.

8

Engagement Quality Control Review

An internal evaluation of the significant judgements made by the audit team and the conclusions reached in formulating its report on an engagement conducted by that firm.

9

Evidence

The information used by auditors in arriving at the conclusion on which the audit opinion is based, which includes the underlying accounting data and all available corroborating information.

10

Financial Reporting Framework

A set of criteria used to determine the measurement, recognition, presentation, and disclosure of material items in the financial statements.

11

Generally Accepted Auditing Standards (GAAS)

Standards that identify necessary qualifications and characteristics of auditors and guide the conduct of the audit examination.

12

Independence in Fact

An auditor's mental attitude and impartiality with respect to the client.

13

Independence in Appearance

The extent to which others perceive auditors to be independent.

14

Inherent Risk

The probability that material misstatement (fraud or error) will occur in an account balance or class of transaction.

15

Inspection

An evaluation of an accounting firms audit engagements and system of quality control conducted by the PCAOB and required for any firms providing audit services to public entities.

16

Internal Control

The policies and procedures implemented by an entity to prevent or detect material accounting errors or frauds and provide for their correction on a timely basis.

17

Materiality

As it relates to financial reporting, the dollar amount that would influence lending or investing decisions of financial statement users.

18

Professional Judgement

The application of relevant training, knowledge, and experience in making informed decisions about appropriate courses of action during the audit engagement.

19

Public Company Accounting Oversight Board (PCAOB)

The body can gather with establishing audit standards for the audits of public entities through the issuance of Auditing Standards. Also responsible for inspecting firms that perform audits on public entities.

20

Public Entity

An entity that offers registered securities, such as stock and bonds, for sale to the general public.

21

Reasonable Assurance

Concept that a GAAS audit may not detect all material misstatements and auditors are not insurers or guarantors regarding the fairness of the entity's financial statements.

22

Risk of Material Misstatement

The combined probability that a material miss statement (error or fraud) will occur and not be prevented or detected on a timely basis by the entity's internal controls.

23

Substantive Procedures

Procedures used by auditors to obtain assurance as to the fairness of the entity's financial statements.

24

System of Quality Control

The policies and procedures implemented by a firm to provide with reasonable assurance that the firm and its personnel: (1) comply with professional standards and applicable legal and regulatory requirements. (2) issue reports that are appropriate in the circumstances.

25

Unmodified (unqualified) Opinion

And opinion which concludes that the financial statements present an entity's financial condition, results of operations, and cash flows in conformity with GAAP.