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17 Cards in this Set

  • Front
  • Back
Acceptable audit risk
measure of how willing the audit is to accept that the fs may be materially misstated after audit is completed and an unqualified opinion has been issued
Allocation of preliminary judgement about materiality
process of assigning to each balance sheet acct the misstatement amt ot be considered material for that acct based on the auditor's preliminary judgement
Audit Risk Model
PDR = AAR / (IR x CR)
formal model reflecting the relationships between acceptable audit risk (AAR), inherent risk (IR), control risk (CR) and planned detection risk (PDR); PDR = AAR/(IRxCR)
Control Risk
measure of auditor's assessment of the likelihood that misstatements exceeding a tolerable amt in a segment will not be prevented or detected by the client's IC
Direct Projection Estimate of Misstatment
estimate of likely missatement in a population based on a sample, excluding sampling risk, and calculated as net misstatments in the sample, divided by the total recorded population value
Engagement Risk
risk that the auditor will suffer harm because of a client relationship, even though the audit report rendered the client was correct
Inherent Risk
measure of auditor's assessment of liklihood that there are material misstatements in a segment before considering the effectiveness of the IC
Known Misstatements
specific misstatements in a class of transactions or acct balance ID'ed during the audit
Likely Misstatements
misstatement that arise from either differences between mgmt's and the auditor's judgement about estimates of acct balances or from projections of mistatements based on the auditor's test of a sample from a population
magnitude of an omission or misstatement of accounting info that, in the light of surrounding circumstances, makes it PROBABLE that the judgement of a reasonable person relying on the info would have been changed or influenced by the omission or misstatment
Planned Detection Risk
measure of the risk that audit evidence for a segment will fail to detect misstatments exceeding a tolerable amount, should such misstatement exist:
PDR = AAR / (IR x CR)
Preliminary Judgement About Materiality
the maximum amount by which the auditor believes that the stmts could be misstated and still NOT affect the decisions of reasonable users, used in audit planning
Revised Judgement About Materiality
a change in the auditor's preliminary judgement made when the auditor determines that the preliminary judgement was too large or too small
the acceptance by auditors that there is some level of uncertainty in performing the audit function
Risk of Material Misstatement
the combination of inherent risk and control risk (IR x CR)
Sampling Error
results because the auditor has sampled only a portion of the population
Tolerable Misstatement
the materialty allocated to any given acct balance used in audit planning