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92 Cards in this Set

  • Front
  • Back

Adverse Opinion


The opinion issued when the auditors conclude that the financial statements do not present the financial condition, results of operations, and cash flows in accordance with GAAP.


Associated (association) with financial statements

Situations in which auditors consent to the use of their name in some form of communication containing the entity's financial statements or submit to their clients or others (such as start third-party users) financial statements they have prepared or assisted in preparing. Auditors should issue a one-paragraph disclaimer when they are associated with (but did not audit) financial statements.

Circumstance-imposed scope limitation

A restriction on auditors from gathering sufficient appropriate evidence because of a situation beyond control of both the auditors and client, such as late appointment of the auditors.

Client-imposed scope limitation

A restriction on auditors from gathering sufficient appropriate evidence because of the client's deliberate refusal to provide them access to evidence or to otherwise limit the auditors' application of auditing procedures.

Group financial statements

The financial statements of more than one component (division, subsidiary, or other segment).

Integrated report

A single report issued by auditors expressing their opinion on the fairness of the financial statements and effectiveness of internal control over financial reporting.

Introductory paragraph

The paragraph in the auditors' report that identifies the financial statements examined by the auditors and the responsibility of auditors and management with respect to the financial statements.

Modified opinion

Any opinion other than an unmodified opinion of an entity's financial statements (qualified opinion, adverse Opinion, or disclaimer of opinion).

Opinion paragraph

A paragraph in the auditors' report that expresses their opinion on whether the financial statements are presented in accordance with GAAP.

Other – matter paragraph

A paragraph added to the auditors' report that is relevant to users' understanding of the audit, the auditor's responsibility, or the auditors' report.

Qualified opinion

An opinion issued when the auditors conclude that, with the exception of one or more issue(s), the financial statements present the financial condition, results of operations, in cash flows in accordance with GAAP. Qualified opinions can be issued for material departures from GAAP and material scope limitations.

Reissued Report

A copy of a previously – issued report that auditors provide or grant entities permission to use in another document after its original date; the report is not modified to consider events are occurring subsequent to the date of the original report.

Scope limitation

A situation in which the auditors are unable to obtain sufficient appropriate evidence. If material, a scope limitation results in the issuance of either a qualified opinion or disclaimer of opinion.

Unmodified opinion

An opinion issued when the auditors conclude that the financial statements present the financial condition, results of operations, and cash flows in accordance with GAAP (until recently, known as unqualified opinion).

Component auditor

The auditor who audits divisions, subsidiaries, or components that are included in the group financial statements.

Updated report

The auditors' report on prior-year financial statements that is based on both the prior-year audit and information that has come to the auditors' attention in the most recent audit.

Date of the auditors' report

The date on which auditors have obtained sufficient appropriate evidence to support their opinion.

Departure from GAAP

Situation in which an entity does not follow GAAP in preparing it's financial statements. Auditors can issue qualified or adverse opinons for material departures from GAAP.

Disclaimer of opinion

A report issued when auditors do not express an opinion on the fairness of the entity's financial statements. Disclaimers of opinion or issued for pervasive going-concern uncertainties, pervasive scope limitations, situations in which auditors' are associated with (but did not audit) financial statements, and situations in which the auditors are not independent.

Division of responsibility

Situation in which the component auditors are involved with the examination of a subsidiary, branch, component, or investment that is included in the financial statements audited by group auditors.

Emphasis-of-matter paragraph

A paragraph added to an auditors' report that provides information fundamental to users' understanding of the financial statements (such as consistency or going-concern uncertainties).

Explanatory paragraph

A paragraph added to an auditors' report that either provides information fundamental to users' understanding of the financial statements (emphasis-of-matter paragraph) or is relevant to users' understanding of the audit, the auditors' responsibility, or auditors' report (other-matter paragraph)

Going-concern uncertainty

Situation in which questions are raised about an entity's ability to continue operations and meet its obligations as they become due.

Group auditors

The auditors who perform the audit of a material portion of the assets, liabilities, revenues, and expenses of an entity's group financial statements; also known as principal auditors.

Agreed-upon procedures

The methods used in an engagement in which users participate in determining the scope of procedures performed by the accountants.

Interim financial information

The financial information or statements covering a period less than a full year or for a 12 month period ending on a date other than the entity's fiscal year end.

Management's discussion and analysis

A required section of financial reports of public companies in which management analyzes the results of operations and cash flows for the periods presented.

Modified cash basis framework

A special-purpose framework that provides limited accruals for the items such as fixed assets and/or inventories and long-term debt.

Pro forma

The description of financial information reflecting historical data as if a certain transaction had occurred.

Responsible party

The person or persons, either as individuals or representatives of the entity, responsible for the subject matter of an attestation engagement.

Review

An engagement in which a practitioner provides limited assurance about financial information.

Review evidence

The evidence required to provide limited assurance attained by (1) inquiring of management, (2) conducting analytical procedures, and (3) obtaining written representations from management.

Service organization

An organization or segment of it that provides services to user entities that are likely to be relevant to user entities' internal control as it relates to financial reporting.

Special purpose framework

A coherent accounting framework in which substantially all important financial measurements are governed by criteria other than GAAP or IFRS.

Sustainability

The triple-bottom-line of economic viability, social responsibility, and environmental responsibility.

Appropriate Financial reporting framework

The financial reporting treatment (I.e. GAAP, IFRS, etc.) adopted by management and, when appropriate, those charged with governance in the preparation of the financial statements that is acceptable in view of the nature of the entity and the objective of the financial statements, or that is required by law or regulation.

SySTrust Services

In assurance function that reviews an entity's computer system to provide confidence to business partners and customers concerning the security, privacy, and confidentiality of information in addition to system availability and processing integrity.

Trust services

A set of professional attestation and advisory functions based on a course set of principles and criteria that addresses the risk and opportunities of IT enabled systems and privacy programs.

WebTrust services

An assurance function designed to reduce the concerns of Internet users regarding the existence of a company and the reliability of key business information placed on its website.

Assurance services

The independent professional functions that improve the quality of information, or its context, for decision-makers.

Attestation

An accounting service resulting in a report on subject matter or an assertion about subject matter that is the responsibility of another party.

Cash basis framework

A special purpose framework in which revenues are recognized when cash is received and expenses are incurred when cash is disbursed.

Compilation

An accounting service in which the practitioner assists in assembling information that is representation of management but provides no insurance.

Examination

In attestation engagement similar in nature to an audit.

eXtensible Business Reporting Language (XBRL)

The communication terminology required by the Securities and Exchange Commission for companies to use to provide financial statement information that has a computer – readable identifying tag for each individual item of data.

Financial forecast

The prospective financial information reflecting an entity's estimates of what is likely to occur in a future period.

Financial projection

The prospective financial information reflecting a transaction or event that may occur in the future.

Act-Utilitarianism

The emphasis on an individual act as it is affected by the specific circumstances of a situation.

Categorical Imperative

Kant's specification of an unconditional obligation to act as one thinks others should act regardless of circumstances.

Commission

A percentage fee charged for professional services in connection with executing a transaction or performing some other business activity.

Contingent Fee

A type of compensation established for the performance of any service in an arrangement in which no amount will be charged unless a specific finding or result is attained or the fee otherwise depends on the result.

Covered Member

Broadly defined, any individual who might be in a position to compromise the integrity of an audit.

Generalization Argument

A judicious combination of the imperative and utilitarian principles; to act as one thinks others should act in a similar circumstance.

Independence

A mental attitude and the appearance that the auditor is not influenced by others in judgments and decisions.

Referral Fee

The (1) compensation that a CPA receives for recommending another CPA's services and (2) that a CPA pays to obtain a client; may or may not be based on a percentage of the amount of any transaction.

Rule-Utilitarianism

The emphasis on the centrality of rules for ethical behavior while still maintaining the criterion of the greatest universal good

Self-Regulation

The quality control reviews and disciplinary actions conducted by fellow CPAs--professional peers.

Virtue Ethics

The focus on the role of one's character in the decision-making process.

Allowance for sampling risk (precision)

The numeric distance from the estimated population value in which the true (but unknown) population value may lie with a given probability; used to adjust the sample estimate to control exposure to sampling risk.

Attributes Sampling

A form of selection used to determine the extent to which some characteristic (attribute) occurs within a population of interest; used by auditors during tests of controls.

Audit Sampling

The application of an audit procedure to less than 100 percent of the items within an account balance or class of transactions for the purpose of evaluating some characteristic of the balance or class.

Block Selection

A method of choosing sample items in which a series of contiguous (or adjacent) items is chosen from the population.

Confidence Level (Reliability)

The likelihood that the true population value lies within the precision interval.

Control Risk

The likelihood that the client's internal control policies and procedures fail to prevent or detect a material misstatement.

Detection Risk

The likelihood that the auditors' substantive procedures will fail to detect a material misstatement that exists within an account balance or class of transactions.

Dual-Purpose Test

An audit procedure used as both a test of controls and a substantive test.

Haphazard Selection

A method of selecting sample items in an unstructured manner but without any intentional bias.

Nonrepresentative Sample

An example that differs substantially from the population on one or more key characteristics of interest from which it is drawn.

Nonsampling Risk

The likelihood that an incorrect conclusion will be reached because of reasons unrelated to sampling.

Nonstatistical Sampling

A plan that does not apply the laws of probability to choose representative items for examination and evaluate the results; does not allow an individual to control exposure to sampling risk.

Population

The entire group of items about which a conclusion is desired in a sampling application.

Precision Interval

A range around the sample estimate that has a certain likelihood (equal to reliability) of including the true population value.

Rate of Deviation

The proportion at which internal control activities are not functioning as intended.

Risk of Incorrect Acceptance

The likelihood that auditors will conclude that the client's account balance is fairly stated when it is materially misstated.

Risk of Incorrect Rejection

The likelihood that auditors will conclude that the client's account balance is materially misstated when it is fairly stated.

Risk of Overreliance (Risk of assessing control risk too low)

The likelihood that the auditors' sample will provide evidence that the client's controls are functioning effectively when they are not functioning effectively.

Risk of underreliance (risk of assessing control risk too high)

The likelihood that the auditors' sample will provide evidence that the client's controls are not functioning effectively when they are functioning effectively.

Sample

A subset of items drawn from a population of interest.

Sample estimate of misstatement

The difference between the recorded account balance and the audited account balance.

Sample Rate of Deviation

Number of deviations discovered in the sample divided by the sample size.

Sampling

The process of making a statement about a population of interest based on examining only a subset (or sample) of that population.

Sampling Interval

The frequency with which items are selected within the population; determined by dividing the number of items in the population by the necessary sample size.

Sampling Risk

The likelihood that the decision be made based on the sample will differ from the decision that would have been made if the entire population had been examined.

Standard Deviation (Standard error of the mean)

A measure of the variability of the population.

Statistical Sampling

A plan that applies the laws of probability to select items for examination and evaluates the results; allows an individual to control the exposure to sampling risk.

Systematic Random Selection (Systematic Selection)

The method of choosing sample items in which a starting point is selected and a fixed number of items are bypassed between selections.

Tolerable Misstatement

The maximum amount by which an account balance or class of transactions can be misstated and be accepted by the audit team as being fairly presented.

Tolerable Rate of Deviation

The maximum rate of deviation the audit team allows without modifying the planned reliance on an internal control policy or procudure.

Unrestricted Random Selection (Random Selection)

A method of choosing items in which all items in the population are assigned a number and selected based on random numbers picked from a random number table or generated from a computer program.

Upper limit on Misstatement

The amount that has a (1-Risk of Incorrect Acceptance) probability of equaling or exceeding the true amount of misstatement in the population.

Upper Limit Rate of Deviation

A measure that adjusts the sample rate of deviation for the audit team's acceptable level of sampling risk; the rate of deviation that has a (1- Risk of overreliance) probability of equaling or exceeding the true population rate of deviation.

Variables Sampling

A form of examination used to examine a population to estimate the amount or value of some characteristic of that population; used by auditors during their substantive procedures.