Define Accounting

the recording, classifying, and summarizing of economic events in a logical manner for
the purpose of providing financial information for decision making
Define Assurance Service
an independent professional service that improves the quality of information for decision
makers
Define Attestation Services
a type of assurance service in which the CPA firm issues a report about a subject
matter or assertion that is the responsibility of another party
Define Audit of historical financial statements
a form of attestation service in which the auditor issues a written report stating whether
the financial statements are material conformity with accounting standards
Define Audit report
the communication of audit findings to users
Define Auditing
the accumulation and evaluation of evidence about information to determine and report
on the degree of correspondence between the information and established criteria
Define Certified Public Accountant
a person who has met state regulatory requirements, including passing the Uniform
CPA exam, and has thus been certified;
a CPA may have as his primary responsibility the performance of the audit function on
published historical financial statements of commercial and non-commercial financial
entities
What are the difference types of audits?
Operational audit
compliance audit
financial audit
What are the different types of auditors?
Gov't accountability office auditor
Internal Revenue agent
Internal auditor
Independent auditors
Define Compliance Audit (1)
a review of an organization's financial records performed to determine whether the
organization is following specific procedures, rules or regulations set by some higher
authority
Define Compliance Audit (2)
an audit performed to determine whether an entity that receives financial assistance
from the federal government has complied with specific laws and regulations
Define Evidence
any information used by the auditor to determine whether the information being audited
is stated in accordance with established criteria
00:0401:40
Upgrade to remove ads
Only $3.99/month
Define Financial statement audit
an audit conducted to determine whether the overall financial statements of an entity
are stated in accordance with specified criteria (usually U.S. or international accounting
standards
Define Gov't accountability office auditor
an auditor working for the U.S. gov't Accountability office (GAO); the GAO reports to
and is responsible solely to Congress
Define Independent auditors
certified public accountants or accounting firms that perform audits of commercial and
non-commercial financial entities
Define information risk
the risk that information upon which a business decision is made is inaccurate
Define Internal auditors
auditors employed by a company to audit for the company's board of directors and
management
Define internal control over financial reporting
an engagement in which the auditor reports on the effectiveness of internal control over
financial reporting; such reports are required for accelerated filer public companies
under Section 404 of SOX
Define Internal Revenue Agents
auditors who work for the IRS and conduct examinations of taxpayer's returns
Define Operational Audit
a review of any part of an organization's operating procedures and methods for the
purpose of evaluating efficiency and effectivenss
Define Review of historical financial statements
a form of attestation in which a CPA firm issues a written report that provides less
assurance than an audit as to whether the financial statements are in material
conformity with accounting standards
Define Sarbanes-Oxley Act
a federal securities law passed in 2002 that provides for additional regulation of Public
companies and their auditors; the ACT established the PCAOB and also requires
auditors of larger public companies to audit the effectiveness of internal control over
financial reporting
What are different forms of evidence?
electronic and documentary data
written and electronic communication with outsiders
Observations by the auditor
Oral testimony of the client (auditee)
What are common causes of information risk?
Remoteness of information
Biases and Motives of the provider
Voluminous data
Complex exchange transactions
What is Remoteness of Information?
It is nearly impossible for a decision maker to have much firsthand knowledge about the
organization with which they do business. When information is obtained from others, the
likelihood of it being intentionally or unintentionally misstated increases
How is the Biases and motives of the provider cause of information risk?
If the information is provided by someone whose goals are inconsistent with those of the
decision maker, the information may be biased in favor of the provider
How is Voluminous Data a cause to information risk?
When companies become larger so does their volume of their exchange transactions.
This increases the likelihood that improperly recorded information is included in the
records
How is a complex exchange transaction a cause to information risk?
the more complex the transactions the more difficult it is to record, especially
transactions between companies
What are the ways to reduce information risk?
User verifies information
User shares information risk with management
Audited financial statements are provided
How does user verification of information reduce information risk?
the user may go the business premise to examine records and obtain information about
the reliability of the statements. but the user needs to have a high level of understanding
with doing an individual verification of company information
How would users sharing information risk with management reduce the information
risk?
Under law management is responsible for providing reliable information to users.
Management could have a potential lawsuit if they do not provide reliable information
How does audited financial statements reduce information risk?
The audited financial statements are reasonably complete, accurate, and unbiased,
which makes them the most reliable information.
What are different types of attestation services that CPAs are able to provide?
audit of historical financial statements
audit of internal control over financial reporting
review of historical financial statements
attestation services on information technology
other attestation services that may be applied to a broad rang of subject matter
Attestation services are a subcategory of what larger service that CPA firms offer?
The Assurance Services category
What criteria does an operational audit establish?
A company's standards for efficiency and the effectivess in several processes
performed throughout the company
What criteria does a compliance audit establish?
that the client is in compliance with the accounting standards
What criteria does a financial statement audit establish?
makes sure that a companies financials are reported in accordance with U.S GAAP