Is Auditing: Exam Ii

Front 1

Control Activities

Back 1

The policies and procedures that help ensure that management’s directives are carried out.

Front 2

Monitoring of Controls

Back 2

A process that assesses the quality of internal control performance over time.

Front 3

Significant Deficiency

Back 3

These can adversely affect the organization’s ability to initiate, record, process, and report financial data consistent with management’s assertions.

Front 4

Material Weakness

Back 4

A significant deficiency, or combination of significant deficiency that results in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected.

Front 5

Computer-Assisted Audit Techniques (CAATs)

Back 5

Computer programs that allow auditors to test computer files and databases.

Front 6

Application Controls

Back 6

Controls that apply to the processing of specific computer applications and are part of of the computer programs used in the accounting system.

Front 7

Control Environment

Back 7

The tone of an organization, which reflects the overall attitude, awareness, and actions of the board of directors, management, and owners influencing the control consciousness of its people.

Front 8

Control Risk

Back 8

The risk that material misstatements that could occur will not be prevented or detected by internal controls.

Front 9

Electronic (Internet) Commerce

Back 9

Business transactions between individuals and organizations that occur without paper documents, using computers and telecommunication network.

Front 10

General Controls

Back 10

Controls that relate to the overall information processing environment and have a pervasive effect on the entity's computer operations.

Front 11

Internal Control

Back 11

The method by which an entity's board of directors, management, and other personnel provide reasonable assurance about the achievement of objectives: 1) reliability of FinRep, 2) effectiveness and efficiency of operations, and 3) compliance with applicable laws and regulations.

Front 12

Reliance Strategy

Back 12

The auditor's decision to rely on the entity's controls, test those controls, and reduce the direct tests of the financial statement accounts.

Front 13

Substantive Strategy

Back 13

The auditor's decision not to rely on the entity's controls and to audit the related financial statement accounts by relying more on substantive procedures.

Front 14

Electronic Data Interchange

Back 14

The transmission of business transactions over telecommunications networks.

Front 15

Internal Control over Financial Reporting (ICFR)

Back 15

Defined as a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of FSs in accordance with GAAP.

Front 16

Control Deficiency

Back 16

Exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis.

Front 17

Walkthrough

Back 17

A transaction being traced by an auditor from origination through the entity's information system until it is reflected in the entity's financial reports.

Front 18

Safeguarding of Assets

Back 18

Policies and procedures that provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the FSs.

Front 19

Company (Entity)-Level Controls

Back 19

Controls that have a pervasive effect on the entity's system of internal control such as controls related to the control environment.

Front 20

Relevant Assertions

Back 20

A FS assertion that has a reasonable possibility of containing a misstatement or misstatements that would cause the FS to be materially misstated.

Front 21

Significant Account or Disclosure

Back 21

An account or disclosure is significant if there is a reasonable possibility that the account or disclosure could contain a misstatement that, individually or when aggregated with others, has a material effect on the FSs, considering the risks of both overstatement and understatement.

Front 22

Standard Unqualified Report

Back 22

Issued when the auditor has gathered sufficient evidence, the audit was performed in accordance with GAAS, and the financial statements conform to GAAP.

Front 23

Scope Limitation

Back 23

Results from an inability to obtain sufficient competent evidence about some component of the financial statements.

Front 24

Adverse Opinion

Back 24

The auditor's opinion that the FS do not present fairly in accordance with GAAP (or other comprehensive basis of accounting) due to a pervasively material misstatement.

Front 25

Disclaimer of Opinion

Back 25

The auditor's indication that no opinion is expressed on the FS.

Front 26

Generally Accepted Auditing Standards (GAAS)

Back 26

Standards against which the quality of the auditor's performance is measured.

Front 27

Materiality

Back 27

The magnitude of an omission or misstatement of accounting information that, in light of surrounding circumstances, makes it probable that the judgment of a reasonable person relying on the information would have been changed or influenced.

Front 28

Other Comprehensive Basis of Accounting

Back 28

FS prepared under regulatory, tax, cash basis, or other definitive criteria having substantial support.

Front 29

Qualified Opinion

Back 29

The auditor's opinion that the FS present fairly, in all material aspects, in accordance with GAAP (or other comprehensive basis of accounting), except for a material misstatement that does not, however, pervasively affect users' ability to rely on the FS. Can also be issued for a scope limitation.

Front 30

Reasonable Assurance

Back 30

A term that implies some risk that a material misstatement could be present in the FS without the auditor detecting it, even when the auditor has exercised due care.

Front 31

Representation Letter

Back 31

A letter that corroborates oral representations made to the auditor by management or by other auditors and documents the continued appropriateness of such representations.

Front 32

Unqualified Opinion

Back 32

The auditor's opinion that the FS present fairly, in all material aspects, in accordance with GAAP (or other comprehensive basis of accounting)--i.e., a "clean" opinion.

Front 33

Close Relative

Back 33

A parent, sibling, or non-dependent child.

Front 34

Justice-Based Approach

Back 34

Is concerned with issues such as equity, fairness, and impartiality.

Front 35

Ethics

Back 35

A system or code of conduct based on moral duties and obligations that indicates how an individual should behave.

Front 36

Rule 101

Back 36

A member in public practice shall be independent in the performance of professional services as required by standards promulgated by bodies designated by Council.

Front 37

Generally Accepted Auditing Standards (GAAS)

Back 37

Measures of the quality of the auditor's performance.

Front 38

Immediate Family

Back 38

A spouse, spousal equivalent, or dependent (whether or not related).

Front 39

Direct-Financial Relationship

Back 39

Results when a covered member has a financial interest in an attest client, such as ownership of stock or a loan to or from the client.

Front 40

Professionalism

Back 40

The conduct, aims, or qualities that characterize or mark a profession or professional person.

Front 41

Utilitarianism

Back 41

Recognizes that decision making involves trade-offs between the benefits & burdens of alternative actions & focuses on the consequences and individuals affected.

Front 42

Rights-Based Approach

Back 42

Assumes that individuals have certain rights and other individuals have a duty to respect those rights when making decisions.

Front 43

Material-Indirect Relationship

Back 43

Results when a covered member has a financial interest in an entity that is associated with an attest client, for example an investment in a mutual fund that owns the client’s stock.