Professional Documents
Culture Documents
Audit and Assurance
Audit and Assurance
adverse opinion
a report stating that the financial statements are not presented in
conformity with GAAP; the opposite of an unqualified opinion
attestation standards
(Appendix) A general set of standards intended to guide attestation
work in areas other than audits of financial statements
audit procedures
the specialized actions auditors take to obtain evidence in the
engagement
audit plan
a list of the audit procedures auditors need to perform to gather
sufficient appropriate evidence on which to base their opinion on
the financial statements
auditing standards
the audit quality guides that apply to all audits
control risk
the probability that a material misstatement (error or fraud) will not
be prevented or detected on a timely basis by the entity's internal
controls
detection risk
the risk that the audit team's substantive procedures will fail to
detect a material misstatement
disclaimer of opinion
the explicit statement by auditors that they express no opinion and
no assurance on the fair presentation of the financial statements in
accordance with GAAP
due care
a level of performance that would be exercised by reasonable
auditors in similar circumstances; auditors are expected to possess
the skills and knowledge of others in their profession and are not
expected to be infallible
engagement quality control review
an internal evaluation of the significant judgment made by the audit
team and conclusion reached in formulation its report
evidence
the information used by auditors in arriving at the conclusion on
which the audit opinion is based, which includes the underlying
accounting data and all available corroboration information
external evidence
the documentary evidence obtained directly from independent
external sources
external-internal evidence
documentary evidence that has originated outside the client's
information processing system but that has been received and
processed by the client
inherent risk
the probability that a material misstatement (error or fraud) will
occur
inspection
an evaluation of an accounting firm's audit engagements and
system of quality control conducted by the PCAOB and required for
any firms providing auditing services to public entities
internal control
the policies and procedures implemented by an entity to prevent or
detect material accounting errors or frauds and provide for their
correction on a timely basis
internal evidence
documentary evidence that is produced, circulated, and maintained
within the client's information systems
materiality
as it relates to financial reporting, the dollar amount that would
influence the lending or investing decisions of financial statement
users
persuasiveness
an overall measure of the ability of evidence to support the auditor's
opinion. Persuasive audit evidence reflects evidence that is both
sufficient and appropriate
peer review
a study of a firm's quality control policies and procedures followed
by a report on the quality of the firm's audit practice in accordance
with its system of quality control. Peer reviews are conducted
through the AICPA's Center for Public Company Audit Firms Peer
Review Program and are generally performed for firms that do not
audit public entities
professional judgement
the application of relevant training, knowledge, and experience in
making informed decisions about appropriate courses of action
during the audit engagement
professional skepticism
a state of mind that is characterized by appropriate questioning and
a critical assessment of audit evidence
public entity
an entity that offers registered securities, such as stock and bonds,
for sale to the general public
reasonable assurance
concept that a GAAS audit may not detect all material
misstatements and auditors are not "insurers" or "guarantors"
regarding the fairness of the entity's financial statements
relevant
the characteristic of audit evidence related to the nature of the
evidence and the information it provides to the auditors
reliable
the characteristic of audit evidence related to the level of trust that
can be placed with respect to evidence
substantive procedures
procedures used by auditor's to obtain assurance as to the fairness
of the entity's financial statement
unqualified opinion
a "clean" opinion that makes no mention of accounting or auditing
deficiencies. The conclusion of an unqualified opinion is that the
financial statements present the financial condition, results of
operations, and cash flows in accordance with GAAP
verbal evidence
responses to audit inquiries provided by the client's officers,
directors, owners, and employees
written representations
written assertions provided by management to auditors on matters
such as the fairness of the entity's financial statements, availability
of all financial records and related data, internal control over
financial reporting, and other specific representations about the
financial statements