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15 Cards in this Set

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Acceptable Audit Risk
A measure of how willing the auditor is to accept that the financial statements may be materially misstated after the audit is completed + unqual. op
Allocation of the Prelimnary Judgment about Materiality
The process of assigning to each balance sheet account the misstatement amount to be considered material for that account based on the auditors J.
Audit Assurance
A complement to acceptable audit risk; an acceptable audit risk of 2% is the same as audit assurance of 98%; aka overall assurance + level of assurance
Audit Risk Model
A formal model reflecting the relationships between acceptable audit risk (AAR), inherent risk (IR), control risk (CR), planned detect. risk; PDR=AAR/(IRxCR)
Control Risk
A measure of the auditor's asmt. of the likelihood that misstatements exceeding a tolerable amount in a segment will not be prevented/detec./IC
Direct Projection Estimate of Misstatement
Estimate of likely misstatement in a population based on a sample, exluding sampling risk + calculated as (net misstatemtns in sample/total samp)*TR pop.V
Engagement Risk
The risk that the auditor or audit firm will suffer harm because of a client relat., even though the audit report rendered for client was correct
Inherent Risk
A measure of the auditor's assessment of the likelihood that there are material misstatements in a segment before considering eff. of IC
Materiality
The magnitude of an omission or misstatement of accounting info that in light of circ., makes it probable that the judgment of a reasonbl. person would be influ.
Planned Detecion Risk
A measure of the risk that audit evidence for a segment will fail to detect mistmts. exceeding a tolerable amount, if mistmts. exist: PDR=AAR/(IRxCR)
Preliminary Judgment about Materiality
The max. amount by which the auditor believes that the stmts. could be misstated and still not affect the decisions of reasonable users - Audit Plan.
Revised Judgment about Materiality
A change in the auditor's prelim. judgment made when the auditor determines that the prelim. judgment was too large or too small
Risk
The acceptance by auditors that there is some level of uncertainty in performing the audit function
Sampling Error
Results because the auditor has sampled only a portion of the population
Tolerable Misstatement
The materiality allocated to any given account balance; used in audit planning