Acct 4335- Ch. 6

Front 1

analytical procedures

Back 1

-tests that involve comparisons of financial data for the current year to that of prior years, budgets, nonfinancial data, or industry averages
-help the auditors obtain an understanding of the client's business, identity financial statement amounts that appear to be affected by error or fraud, or identify other potential problems

Front 2

assertions

Back 2

representations of management that are communicated, explicitly or implicitly,by the financial statements

Front 3

audit committee

Back 3

a committee composed of outside directors charged with responsibility for appointing, compensating, and overseeing the auditors

Front 4

audit plan

Back 4

a description of the nature, timing, and extent of the audit procedures to be performed and is often documented with an audit program

Front 5

audit program

Back 5

-a detailed listing of the specific audit procedures to be performed in the course of an audit engagement
-provide a basis for assigning and scheduling audit work and for determining what work remains to be done
-specially tailored to the risks and internal controls of each engagement

Front 6

audit risk

Back 6

-at the overall engagement level, this is the risk that the auditors may unknowingly fail to appropriately modify their opinion on financial statements that are materially misstated
-at the financial statement assertion level, it is the risk that a particular assertion about an account balance is materially misstated

Front 7

business risks

Back 7

risks that threaten management's ability to achieve the organization's objectives

Front 8

control risk

Back 8

the risk that a material misstatement that could occur in an account will not be prevented or detected on a timely basis by internal control

Front 9

dual-puprose procedure

Back 9

-serves as a test of controls and a substantive test of the details of the transactions that occurred during the year

Front 10

engagement letter

Back 10

-a formal letter sent by the auditors to the client at the beginning of an engagement summarizing such matters as the nature of the engagement, any limitations on the scope of audit work, work to be done by the client's staff, and the basis for the audit fee
-purpose is to avoid misunderstandings

Front 11

engagement risk

Back 11

the risk of loss or injury to the auditors' reputation by association with a client that goes bankrupt or one whose management lacks integrity

Front 12

fraudulent financial reporting (management fraud)

Back 12

material misstatement of financial statements by management with the intent to mislead financial statement users

Front 13

further audit procedures

Back 13

-substantive procedures for all relevant assertions and tests of controls when the auditors' risk assessment includes an expectation that controls are operating effectively, or when substantive procedures alone do not provide sufficient appropriate audit evidence
-auditors perform risk assessment procedures to obtain an understanding of the client and its environment including internal control
-they then conduct a risk assessment and determine the appropriate further audit procedures

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inherent risk

Back 14

the risk of material misstatement of an assertion about an account without considering internal control

Front 15

interim report

Back 15

the time interval from the beginning of audit work to the balance sheet date

Front 16

internet

Back 16

-an international network of independently owned computers that operates as a giant computing network
-data are stored on web servers, which are computers scattered throughout the world

Front 17

misappropriation of assets (defalcations)

Back 17

theft of client assets by an employee or officer of the organization

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opening balances

Back 18

-exist at the beginning of the period and are based upon the closing balances of the prior period and reflect the effects of transactions and events of prior periods and accounting policies applied in the prior period

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overall audit strategy

Back 19

involves determining overall characteristics of the engagement that define its scope, determine the engagement's reporting objectives to plan the timing of procedures, and considering important factors that will determine the focus of the audit team's efforts

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performance materiality

Back 20

amount set by the auditors at less than materiality for accounts (or individual financial statements) to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality for the financial statements as a whole

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predecessor auditors

Back 21

a CPA firm that formerly served as auditor but has resigned from the engagement or has been notified that its services have been terminated

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relevant assertion

Back 22

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

Front 23

risk assessment procedures

Back 23

-the audit procedures performed to obtain an understanding of the entity and its environment, including the entity's internal control
-designed to identify and assess the risks of material misstatement, whether due to fraud or error, at the financial statement and assertion levels

Front 24

1. inquiries of management and others within the entity
2. analytical procedures
3. observation and other procedures, including inquiries of other outside the entity

Back 24

3 types of risk assessment procedures

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shopping for accounting principles

Back 25

conduct by some enterprises that discharge one independent auditing firm after seeking out another firm that will sanction a disputed accounting principle or financial statement presentation

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significant risk

Back 26

identified and assessed risks of material misstatement that, in the auditor's judgment, require special audit consideration

Front 27

substantive procedures

Back 27

-tests of accounts balances and transactions designed to detect any material misstatements in the financial statements
-their nature, timing, and extent are determined by the auditors' assessment of risks and their consideration of the client's internal control

Front 28

successor auditors

Back 28

the auditors who have accepted an engagement or who have been invited to made a proposal for an engagement to replace the CPA firm that formerly served as auditor

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tests of controls

Back 29

tests directed toward the design or operation of a control to assess its effectiveness in preventing or detecting material misstatements of financial statement assertions

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time budget

Back 30

an estimate of the time required to perform each step in the audit

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transaction cycle

Back 31

-the sequence of procedures applied by the client in processing a particular type of recurring transaction
-the auditors' consideration of internal control often is organized around the client's major transaction cycles

Front 32

SAS 104-111

Back 32

collectively known as audit risk standards

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1. incentive
2. opportunity
3. attitude

Back 33

3 risk factors

Front 34

1. existence or occurrence
2. rights and obligations
3. completeness
4. cutoff
5. valuation or allocation
6. presentation and disclosure

Back 34

6 assertions

Front 35

1. plan the audit
2. obtain understanding of client, its environment, and internal control
3. assess risks of material misstatement and design further audit procedures
4. perform further audit procedures
5. complete the audit
6. form an opinion and issue the audit report

Back 35

6 stages of an audit