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26 Cards in this Set

  • Front
  • Back
Acceptable Audit Risk
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.
Audit Strategy
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
written records of client's expectations for period; a comparison of budgets vs actuals may indicate whether on not misstatements are likely
rules and procedures adopted by a copr's stockholders, including the corp's fiscal year and duties and powers of officers
Client Business Risk
risk that the client will fail to achieve it's objectives related to:
1. reliability of financial reporting
2. effectiveness and efficiency of operations
3. compliance w/ laws and regulations
Corporate Charter
-legal document granted by the state in which a co is inc that recognizes a corp as a separate entity
-includes the name of corp, date of inc., capital stock of corp is authorized to use, types of buisness activities corp is authorized to conduct
Corporate minutes
official record of meetings of a corp's BOD and SH, in which corp issues, like declarations of dividends and approval of contracts, are documented
Engagement Letter
an agreement between CPA firm and client as to the terms of the engagement for the conduct of the audit and related services
Inherent Risk
measure of auditor's assessment of likelihood that there are MMS in a segment before considering the effectiveness of IC
Initial Audit Planning
involves deciding whether to accept or continue doing audit for client, ID client's reasons for audit, obtaining engagement letter and developing audit strategy
Related Party
affiliated co, principal owner of the client co, or any other party with which the client deals, where one of the parties can influence the mgmt or operating policies of the other
Related Party Transaction
any transaction between the cliend and a related party
Audit Procedure
detailed instruction that explains audit evidence to be obtained during audit
Persuasiveness of Evidence (2 determinants)
1. appropriateness
2. sufficiency
Appropriateness of Evidence
measure of quality of evidence, meaning it's relevance and reliability in meeting audit objectives for classes of tranx, acct balances and related disclosures
Relevance of Evidence
evidence must pertain or be relevant to audit objectives
Reliability of Evidence (six characteristics)
1. independence of provider (3rd parties)
2. effectiveness of client's IC
3. auditor's direct knowledge
4. qualifications of individuals providing info
5. degree of objectivity
6. timeliness
Sufficiency of Evidence
measured primarily by sample size selected by auditor
-auditor's expectations and effectiveness of IC are two biggest factors in selecting sample size
Types of Audit Evidence (8)
1. physical examination
2. confirmation (written from 3rd party)
3. documentation
4. analytical procedures
5. inquiries of client
6. recalculation
7. reperformance
8. observation
Two most expensive types of evidence
1. physical exam
2. confirmation
Three moderately expensive types of evidence
1. documentation
2. analytical procedures
3. reperformance
Three least expensive types of evidence
1. observation
2. inquiries
3. recalculation
Audit Documentation
principal record of auditing procedures applied, evidence obtained, and conclusions reached by auditor in the engagement
Ownership and confidentiality of audit files
1. during engagement, property of auditor, then kept on file at firm
2. must be kept confidential
Supporting Schedules
-largest part of documentation
-prepared by client
-support specific amts on FS
Major types of supporting schedules (7)
1. analysis shows activity in GL
2. trial balance details makeup of YE balance
3. reconcilations support specific amt
4. tests of reasonableness
5. summary of procedures summarizes results of specific audit procedure
6. examination of supporting documents shows detailed tests performed
7. informational