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100 Cards in this Set
- Front
- Back
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Accounting
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the recording, classifying, and summarizing of economic events in a logical manner for the purpose of providing financial information for decision making.
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Assurance Service
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an independent, professional service that improves the quality of information for decision makers
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Attestation Service
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a type of assurance service in which the CPA firm issues a report about the reliability of an assertion that is the responsibility of another party
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Audit of Historical Financial Statements
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a form of attestation service in which the auditor issues a written report stating whether the FS are in material conformity with GAAP
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Audit Report
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the communication of audit findings to users
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Auditing
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the accumulation and evaluation of evidence about information to determine and report on the degree of correspondence between the information and established criteria
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CPA
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a person who has met state regulatory requirements, including passing the CPA exam, and has thus been certified; a CPA may have as his or her primary responsibility the performance of the audit function on published historical FS of commercial and noncommercial financial entities.
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Compliance Audit
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1. Review of an organization's fin. records performed to determine whether the organization is following specific procedures, rules or regulations
2. an audit performed to determine whether an entity that receives financial assistance from the federal government has complied with specific laws and regulations |
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Evidence
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any information used by the auditor to determine whether the information being audited is stated in accordance with established criteria
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Financial Statement Audit
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an audit conducted to determine whether the overall financial statements of an entity are stated in accordance with GAAP
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Government Accountability Office Auditor
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an auditor working for the U.S. G.A.O.; the GAO reports to and is responsible solely to Congress
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Independent Auditors
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CPAs or accounting firms that perform audits of commercial and non-commercial financial entities
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Information Risk
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the risk that information upon which a business decision is made is inaccurate
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Internal Auditors
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auditors employed by a company to audit for the company's Board of Directors and management
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Internal Control over Financial Reporting
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an attestation engagement in which the auditor reports on the effectiveness of internal control over financial reporting; such reports are required for public companies under Section 404 of SOX
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Internal Revenue Agent
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auditors who work for the IRS and conduct examinations of taxpayers' returns
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Operational Audit
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a review of any part of an organization's operating procedures and methods for the purpose of evaluating efficiency and effectiveness
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Review of Historical Financial Statements
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a form of attestation in which a CPA firm issues a written report that provides less assurance than an audit as to whether the financial statements are in material conformity with GAAP
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SOX
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a federal securities law passed in 2002 that provides for additional regulation of public companies and their auditors; the Act established the PCAOB and also requires auditors to attest to management reports on the effectiveness of internal control over financial reporting
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AICPA
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American Institute of Certified Personal Accountants, a voluntary organization of CPAs that sets professional requirements, conducts research, and publishes materials relevant to accounting, auditing, management consulting services, and taxes
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AICPA Practice Sections
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sections of the AICPA established for CPA firms consisting of the Center for Public Company Audit Firms (CPCAF) and the Private Companies Practice Section (PCPS), also referred to as the AICPA Alliance for CPA Firms; the sections were established to improve the quality of practice by CPA Firms consistent with AICPA quality control standards
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Generally Accepted Auditing Standards (GAAS)
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10 auditing standards, developed by the AICPA, consisting of General Standards, Standards of Field Work, and standards of reporting, along with interpretations; often called Auditing Standards
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International Standards on Auditing (ISAs)
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statements issued by the International Auditing Practices Committee of the International Federation of Accountants to promote international acceptance of auditing standards
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Peer Review
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the review by CPAs of a CPA firm's compliance with its quality control system
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Public Company Accounting Oversight Board (PCAOB)
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Board created by SOX to oversee auditors of public companies, including establishing auditing and quality control standards and performing inspections of registered accounting firms
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Quality Control
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methods used by a CPA firm to ensure that the firm meets its professional responsibilities to clients and others
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Securities Exchange Act (SEC)
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a federal agency that oversees the orderly conduct of the securities markets; SEC assists in providing investors in public corporations with reliable information upon which to make investment decisions
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Statements on Auditing Standards (SASs)
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pronouncements issued by the AICPA to interpret GAAS
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Adverse Opinion
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a report issued when the auditor believes the FS are so materially misstated or misleading as a whole that they do not present fairly the entity's financial position or the results of its operations and cash flows in conformity with GAAP
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Combined Report on Financial Statements and Internal Control over Financial Reporting
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audit report on the FS and the effectiveness of internal control over financial reporting required for public companies under Section 404 of the SOX Act.
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Disclaimer of Opinion
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a report issued when the auditor is not able to become satisfied that the overall financial statements are fairly presented or the auditor is not independent
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Material Misstatements
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a misstatement on the FS, knowledge of which would effect a decision of a reasonable user of the statements
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Qualified Opinion
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a report issued when the auditor believes that the overall FS are fairly stated but that either the scope of the audit was limited or the financial data indicated a failure to follow GAAP
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Standard Unqualified Audit Report
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the report a CPA issues when all auditing conditions have been met, no significant misstatements have been discovered and left uncorrected, and it is the auditor's opinion that the FS are fairly stated in accordance with GAAP
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Unqualified Audit Report with Explanatory Paragraph or Modified Wording
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an unqualified report in which the FS are fairly presented, but the auditor believes it is important, or is required, to provide additional information
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Analytical Procedures
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use of comparisons and relationships to assess whether account balances or other data appear reasonable
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Appropriateness of Evidence
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a measure of the quality of evidence; appropriate evidence is relevant and reliable in meeting audit objectives for classes of transactions. account balances, and related disclosures
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Audit Documentation
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the principal record of auditing procedures applied, evidence obtained, and conclusions reached by the auditor in the engagement
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Audit Procedure
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detailed instruction for the collection of a type of audit evidence
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Audit Program
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list of audit procedures for an audit area or an entire audit; the audit program always includes audit procedures and may also include sample sizes, items to select, and timing of the tests
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Confirmation
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the auditor's receipt of a written or oral response from an independent third party verifying the accuracy of information requested
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Current Files
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all audit files applicable to the year under audit
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Documentation
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the auditor's inspection of the client's documents and records to substantiate the information that is or should be included in the FS
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External Document
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a document, such as a vendor's invoice, that has been used by an outside party to the transaction being documented and that the client now has or can easily obtain
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Inquiry
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the obtaining of written or oral information from the client in response to specific questions during the audit
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Internal Document
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a document, such as an employee time report, that is prepared and used within the client's organization
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Lead Schedule
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and audit schedule that contains the detailed accounts from the general ledger making up a line item total in the working trial balance.
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Observation
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the use of the senses to assess client activities
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Permanent Files
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auditors' files that contain data of a historical or continuing nature pertinent to the current audit such as copies of articles of incorporation, bylaws, bond indentures, and contracts
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Persuasiveness of Evidence
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the degree to which the auditor is convinced that the evidence supports the audit opinion; the two deteminants of persuasiveness are the appropriateness and sufficiency of the evidence
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Physical Examination
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the auditor's inspection or count of a tangible asset
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Recalculation
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the rechecking of a sample of the computations made by the client, including mathematical accuracy of individual transactions and amounts and the adding of journals and subsidiary records
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Reliability of Evidence
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the extent to which evidence is believable or worth of trust; evidence is reliable when it is obtained (1) from an independent provider, (2) from a client with effective internal controls, (3) from the auditor's direct knowledge, (4) from qualified providers such as law firms and banks, (5) from objective sources, (6) in a timely manner
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Reperformance
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the auditor's independent tests of client accounting procedures or controls that were originally done as part of the entity's accounting and internal control system
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Sufficiency of Evidence
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the quantity of evidence; proper sample size
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Supporting Schedules
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detailed schedules prepared by the client or the auditor in support of specific amounts on the FS
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Tick Marks
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symbols used on an audit schedule that provide additional information or details of audit procedures performed
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Unusual Fluctuations
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significant unexpected differences indicated by analytical procedures between the current year's unaudited financial data and other data used in comparisons
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Vouching
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the use of documentation to support recorded transactions or amounts
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Working Trial Balance
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a listing of the general ledger accounts and their year-ending balances
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Acceptable Audit Risk
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a measure of how willing the auditor is to accept that the FS may be materially misstated after the audit is completed and an unqualified opinion has been issued
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Audit Strategy
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overall approach to the audit that considers the nature of the client, risk of significant misstatements, and other factors such as the number of client locations and past effectiveness of client controls
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Budgets
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written records of the client's expectations for the period; a comparison of budgets with actual results may indicate whether or not misstatements are likely
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Bylaws
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the rules and procedures adopted by a corporation's stockholders, including the corporation's fiscal year and the duties and powers of its officers
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Client Business Risk
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the risk that the client will fail to achieve its objectives related to (1) reliability of financial reporting, (2) effectiveness and efficiency of operations, and (3) compliance with laws and regulations
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Corporate Charter
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a legal document granted by the state in which a company is incorporated that recognizes a corporations as a separate entity; it includes the name of the corporation, the date of incorporation, capital stock the corporation is authorized to issue, and the types of business activities the corporation is authorized to conduct
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Corporate Minutes
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the official record of the meetings of a corporation's board of directors and stockholders, in which corporate issues, such as the declaration of dividends and the approval of contracts, are documented
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Engagement Letter
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an agreement between a CPA firm and the client as to the terms of the engagement for the conduct of the audit and related services
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Inherent Risk
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a measure of the auditor's assessment of the likelihood that there are material misstatements in a segment before considering the effectiveness of internal control
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Initial Audit Planning
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involves deciding whether to accept or continue doing the audit for the client, identifying the client's reasons for the audit, obtaining and engagement letter, and developing an audit strategy
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Related Party
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affiliated party, principal owner of the client company, or any other party with which the client deals, where one of the parties can influence the management or operating policies of the other
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Related Party Transaction
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any transaction between the client and a related party
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Assessment of Control Risk
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a measure of the auditor's expectation that internal controls will neither prevent material misstatements from occurring nor detect and correct them if they have occurred; control risk is assessed for each transaction-related audit objective in a cycle or class of transactions
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Chart of Accounts
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a listing of all the entity's accounts, which classifies transactions into individual Balance Sheet and Income Statement accounts
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Compensating Control
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a control elsewhere in the system that offsets the absence of a key control
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Collusion
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a cooperative effort among employees to steal assets or misstate records
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Control Activities
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policies and procedures, in addition to those included in the other four components of internal control, that help endure that necessary actions are taken to address risks in the achievement of the entity's objectives; they typically include the following five specific control activities: (1) adequate separation of duties, (2) proper authorization of transactions and activities, (3) adequate documents and records (4) physical control over assets and records, and (5) independent checks on performance
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Control Deficiency
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a deficiency in the design or operation of controls that does not permit company personnel to prevent ot detect misstatements on a timely basis
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Control Environment
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the actions, policies, and procedures that reflect the overall attitudes of top management, directors, and owners of an entity about internal control and its importance to the entity
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Control Risk Matrix
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a methodology used to help the auditor assess control risk by matching key internal controls and internal control deficiencies with transaction-related audit objectives
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Flowchart
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a diagrammatic representation of the client's documents and records and the sequence in which they are processed
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General Authorization
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companywide policies for the approval of all transactions within stated limits
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Independent Checks
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internal control activities designed for the continuous internal verification of other controls
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Information and Communication
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the set of manual and/or computerized procedures that initiates, records, processes, and reports an entity's transactions and maintains accountability for the related assets
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Internal Control
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a process designed to provide reasonable assurance regarding the achievement of management's objectives in the following categories: (1) reliability of financial reporting. (2) effectiveness and efficiency of operations, and (3) compliance with applicable laws and regulations
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Internal Control Questionnaire
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a series of questions about the controls in each audit area used as a means of indicating to the auditor aspects of internal control that may be inadequate
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Key Controls
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controls that are expected to have the greatest effect on meeting the audit objectives
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Management Letter
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an optional letter written by the auditor to a client's management containing the auditor's recommendations for improving any aspect of the client's business
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Material Weakness
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a significant deficiency in internal control that, by itself, or in combination with other significant deficiencies, results in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected
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Monitoring
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management's ongoing and periodic assessment of the quality of internal control performance to determine that controls are operating as intended and are modified when needed
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Procedures to Obtain an Understanding
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procedures used by the auditor to gather evidence about the design and implementation of specific controls
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Narrative
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a written description of a client's internal controls, including the origin, processing, and disposition of documents and records, and the relevant control procedures
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Risk Assessment
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management's identification and analysis of risks relevant to the preparation of FS in accordance with GAAP
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Separation of Duties
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separation of the following activities in an organization: (1) custody of assets from accounting (2) authorization from custody of assets, (3) operational responsibility from recordkeeping, (4) IT duties from outside users of IT
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Significant Deficiency
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one or more control deficiencies exist that, more than remotely, adversely affect a company's ability to initiate, authorize, record, process, or report external FS reliability
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Significant Risks
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risks the auditor believes require special audit consideration; the auditor is required to test the operating effectiveness of controls that mitigate these risks in the current year audit if control risk is to be assessed below maximum
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Specific Authorization
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case-by-case approval of transactions not covered by companywide policies
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Tests of Controls
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audit procedures to test the operating effectiveness of controls in support of reduced assessed control risk
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Those Charged with Governance
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the person(s) with responsibility for overseeing the strategic direction of the entity, including overseeing the financial reporting and disclosure process
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Walkthrough
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the tracing of selected transactions through the accounting system to determine that controls are in place
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