Auditing Chapter 5

Front 1

Adminsitrative vorking papers

Back 1

Working papers specifically designed to help the auditors in the planning and administration of the engagment, such as sudit programs, internal control questionnaires and flowcharts, time budgets, and engagnemnt memoranda.

Front 2

Audit evidence

Back 2

Any information that coorboates or refutes that auditors' premixe that the financial statements present fairly the client's fianncial position and operating results.

Front 3

Audit risk

Back 3

the risk that the auditors may unkowingly fail to appropriatley modify their opinikon on financial statements that are materally misstated.

Front 4

Common-size financal statements

Back 4

Financial Statements that present each amount as a percentage of some financial statemtn base. As and example, a common-sized financial statement income all revenues and expenses as a percentage of net sales.

Front 5

Control risk

Back 5

The risk that a material misstatement that could occur in account will not be prevented or detected o a timely basis by internal control.

Front 6

Cooroborating documents

Back 6

documents and memoranda included in the working papers that substantiate representations contained in the client's financial statements. These working papers include audit confirmations, lawyers' letters, copies of contracts, copies of minutes of dierctors' and stockholders' meetings, and representation letters from the client's management.

Front 7

cutoff

Back 7

The process of determining that transactions occuring near the balance sheet date are assigned to the prper accounting period.

Front 8

Detection risk

Back 8

The risk that the auditors' procedures will lead them to conclude that a financial statement assertion is not materially misstated when in fact such misstatemnt does exist.

Front 9

Documentation completion date

Back 9

the date on which doeumentation should be completed. This is within 60 days of the dlivery date.

Front 10

experienced auditor

Back 10

For purposes of audit documentation, an individual who possesses the competencies and skills enabling himor her to perform an audit and who has a reasonable understanding of the audit processes and of auditing and financial reporting issues relevant ot the industry in which the client operates.

Front 11

Horizontal analysis

Back 11

a technique that involves comparing financial statment aomounts and ratios for a particular company from year to year.

Front 12

Inherent risk

Back 12

The risk of material misstatement of a financial statement assertion, assuming there were no related controls.

Front 13

Material

Back 13

Of substantial importance. Significant enough to affect evaluations or decisions by users of financial statemnts. Information that should be disclosed so that financial statments constirute a fair presentation. Involves both qualitative and qunatitative considerations.

Front 14

Physical evidence

Back 14

Evidence derived by the auditors from physical examination

Front 15

Relevant asertions

Back 15

assertions that have a meaningful bearing on whether an account balance, class of transaction, or disclosure is fairly stated.

Front 16

Representation letter

Back 16

A single letter or separate letters prepared by officers of the client company at the auditors' request setting forth certain representations about the company's fianncial position or operations.

Front 17

Specialist

Back 17

a person or firm possessing special skill or knowledge in a field other than accounting or auditing, such as an actuary.

Front 18

substantive procedures (test)

Back 18

Procedures performed byt the auditor to detect material misstatements in account balances, classes of transactions, and disclosures.

Front 19

Vertical analysis

Back 19

A form of analysis that presents financial statment amojnts for a period as a percentage of some financial statement base. This analysis involves the preparation of common-size financial statements.

Front 20

Working papers

Back 20

papers that document the evidence gathered by auditors to show the work they have done, the methods and procedures they have followed, and the conclusions they have developed in an audit of financial statements or other type of engagement.

Front 21

working trial balance

Back 21

A working paper that lists the balances of acounts in the general ledger for the current and the prevous year and also proides columns for the auditors' adjustments and reclassifications and for the final amounts that will appear in the financial statements.