Chapter 4 - Vocabulary Flashcards Preview

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Flashcards in Chapter 4 - Vocabulary Deck (19):
1

Accounting Estimates

The approximations of financial statement numbers often included in financial statements.

2

Audit Committee

A subset of a company's Board of Directors composed of outside members who can provide a buffer between the audit firm and management.

3

Audit Risk

The risk that the auditor will express and inappropriate audit opinion when the financial statements are material misstated.

4

Audit Strategy Memorandum

The scope, timing, and direction for auditing each relevant assertion based on the results of the audit risk model.

5

Defalcation

Employee fraud or embezzlement.

6

Direct-Effect Noncompliance

The violations of laws or government regulations by the entity or its management or employees that produce direct and material effects on dollar amounts in financial statements.

7

Embezzlement

A type of fraud involving employees or nonemployees wrongfully taking money or property entrusted to their care, custody, and Control, often accompanied by false accounting entries and other forms of lying and cover up.

8

Employee Fraud

The use of fraudulent means to take money or other property from an employer. It consists of 3 phases: (1) the fraudulent act, (2) the conversion of the money or property to the fraudster's use, and (3) the cover up.

9

Enterprise Risk Management

A process effected by an entity's Board of Directors, management, and other personnel applied in strategy setting and across the enterprise that is designed to identify potential events that may affect the entity and to manage risks to be within its risk appetite to provide reasonable assurance regarding the achievement of entity objectives.

10

Errors

The unintentional misstatements or omissions of amounts or disclosures in financial statements.

11

Extended Procedures

The audit procedures used in response to heightened fraud awareness as the result of the identification of significant risks.

12

Fraud

The act of knowingly making material misrepresentations of fact with the intent of inducing someone to believe the falsehood and act on it and, thus, suffer a loss or damage0z

13

Fraudulent Financial Reporting

The intentional or reckless conduct, whether by act or omission, that results in materially misstated financial statements.

14

Horizontal Analysis

The comparative analysis of year to year changes in balance sheet and income statement accounts.

15

Indirect-Effect Noncompliance

The violation of laws and regulations that does not directly affect specific financial statement accounts or disclosures.

16

Larceny

Simple theft of an employer's property.

17

Management Fraud

The deliberate fraud committed by management that injures investors and creditors through materially misstated information.

18

Relevant Assertion

A financial statement assertion that has a reasonable possibility of containing a misstatemeant or misstatements that would cause the financial statements to be materially misstated.

19

Related Parties

Those individuals or organizations that are closely tied to the audit client, possibly through family ties or investment relationships.