Auditing Vocab Chapters 1-3

Front 1

Agreed-upon procedures engagement

Back 1

an attest engagement in which the CPAs agree to perform procedures for a specified party and issue a report that is restricted to use by that party.

Front 2

American Institute of Certified Public Accountants (AICPA)

Back 2

The national professional organization of CPAs engaged in promoting high professional standards to ensure that CPAs serve the public interest.

Front 3

Assertation

Back 3

A representation or declaration made by the reponsible party, typically mangement of the entity

Front 4

Assurance services

Back 4

Professional services that enhance the quality of information, or its context, for decision makers. Many assurane services involve some form of attestation.

Front 5

Attest engagement

Back 5

An engagement in which the CPAs issue an examination, a review, or an agreed-upon procedures report on subject matter oor an assertionabout subject matter that is the responsibliity of another party

Front 6

audit of financial statements

Back 6

an examination designed to provide the CPA's highest level of assurance that the financial stements folow generally accepted accounting principles, or another acceptable basis of accounting .

Front 7

business risk (of the client)

Back 7

the risk assumed by investors or creditors that is associated with the company's survival and profitability.

Front 8

Certified public accountant

Back 8

a person licensed by the stte to practice pulic accounting as a profession, based on having passed the uniform CPA examination and having met certain educational and expericece requirements.

Front 9

compliance audit

Back 9

an audit to measure the compliance of the organization with some established creteria

Front 10

CPA examination

Back 10

a uniform examination administered by the AICPA for state boards of accountancy to enable them to issue CPA license. The examination covers the topics of accounting and reporting, auditing, business environment, regulation and professional responsibilities.

Front 11

examination

Back 11

an attest engagement designed to provide the highest level of assurance that CPAs provide on an assertion. An examination of financial statements is referred to as an audit.

Front 12

fianancial audit

Back 12

an audit of the fifnancial statements of an organization or segement of the organization

Front 13

Fraud

Back 13

intentional misrepresentation of a material fact

Front 14

GAAP

Back 14

Concepts or standards established by such authoritative bodiesas the FASB and the GASB and accepted by the accounting profession as essitian to proper financial reporting

Front 15

Information risk

Back 15

the risk that the information used by investors, creditors, and others to asses business risk is not accurate.

Front 16

Integrated audit

Back 16

as requied by the SOX and the public company accounting oversight board (PCAOB), an audit that includes providing assurance on both the financial stements an dinternal control over financial reporting. Intergrated audits are required of publicly trade companies in the United States.

Front 17

Operational Audit

Back 17

An analysis of a department or other unit of a business or governmental organization to measure the effectiveness an defficeincy of opreations.

Front 18

Public Company Acounting oversight Board (PCAOB)

Back 18

The five-member board established in 2002 to oversee the audit of public companies that are subject to the securities laws. The obard has abuthority to establish or adopt, or both, rules for auditing, quality control, ethics, independence and other standards relating to the preparation of audit reports

Front 19

Review

Back 19

an enggemtne desinged to lend only a limited degree of assurance relating to an assertion. As discussed infurther detail in chpate 19, the procedures performed are generally limited to inquires and analytical procedures

Front 20

SOX

Back 20

A set fo reforms that toughened penalties for corporate fraud, restircte the kinds of consulting CPAs can perform for audit clients, and created the PCAOB to oversee CPAs and publice accounting firms.

Front 21

SEC

Back 21

a governemtn agency authorized to regulate companies seeking approval to issue securities for sale to the public.

Front 22

Statements on Auditing Standards (SASs)

Back 22

A series of statements issued by Auditing Standards Board of the AICPA. These statements are considered to be inerpretations of generally accepted auditing standards.

Front 23

Suitable Criteria

Back 23

The standards of benchmarks used to measure an present the subject matter and against which the CPA evaluates the subject matter. Suitable criteria are criteria that are established or developed by groups composed of experts that follow due porcess procedures, including exposure of the proposed criteria for pulic comment. Suitable criteria must have each of the folloing attirbutes: objectivity, measurability, completeness, and relevance.

Front 24

Adequate Disclosure

Back 24

All essential information as required by generally accepted accopunting principles is included int eh financial stemetns.

Front 25

Adverse opinion

Back 25

an opinion issued the the auditors that the financial staments they have audited do not present fairly the financial position, reults of operation, or cash flows incomformity with acounting principles generally accepted in the USA

Front 26

Audti risk

Back 26

the risk that the auditors may unkowingly fail to appropriately modify their opinion on financial statements that are materially misstated.

Front 27

Auditors' report

Back 27

A very precise document designed to communicate exactly the character an limitaions of the reponsibility being assumed by the auditors; in standard from, the report consists of an introductory paragraph, a scope paragraph, and an opinion paragraph.

Front 28

Consistency

Back 28

the concept of using the same accounting principles from year to year so that the successive financial statments issued by a business entity will be comparable.

Front 29

Deisclaimer of opinion

Back 29

A form of report in which the auditors state that they do not express an opinion on the fiancial stemets; it should include a separate paragraph stateing the auditors' reasons for disclaiming an opinon and also dislcosing any reservations they may have concerning the financial statements.

Front 30

Error

Back 30

an unitentional misstement of financial stements or omissionof an mount or a disclosure.

Front 31

GAAS

Back 31

A set of 10 stnadards adobpted by the AICPA and binding for audits of nonpublic companies and desinged to ensure the quality of the auditors work

Front 32

Illegal acts

Back 32

violations of laws or gernmental regulations.

Front 33

Independence

Back 33

a most important auditing standard, which prohigits CPAs from expressing an opinon on financial stements of an enterprise unless they are independent with repct to such enterprise: independence isimpaired by a dirct financial interes, service as an officer or trustee, certain loans to or from the enterprise, and various other relationships.

Front 34

Inspection

Back 34

a process that leads to an assessment of the degree of compliance of eah registered public accounting firm and associated persons of that firm with the SOX and the board's requiremnts in connection with its performance of audits, issuance of audit reports, and related matters.

Front 35

Internal control

Back 35

A process, effeted by the entity's board of directors, managment, and other peronnel, designed to provide reasonable assurance regarding he achievement of objectives inthe following categories; 1. reliability, 2. effectiveness and efficency of poerations; and 3. compliance with applicable laws and regulations.

Front 36

Internatioanl Auditing and Assurance Standards Board (IAASB)

Back 36

A committee of the internatioanl Federation of Accountants, established to issue standards on auditing and reporting practices to improve the degree of uniformity of auditing practices and related services throughout the world.

Front 37

Internatioanl Federation of Accountants (IFAC)

Back 37

A worldwide organization of national accounting bodies established to help foster a coordinated worlwide accounting profession with harmonized standards.

Front 38

Perr Review

Back 38

The study and Evaluation of a CPA firm's quality control policies and procedures by another CPA firm or a team of qualified CPAs.

Front 39

Qualified Opinion

Back 39

the appropriate from of audit report when ther is a limitaion in the scope of athe audit or when the financial sttatemetns depart from the GAAP significantly enough to require mention in the auditors repot, but not so significantly as to necessitate discalingin an opinion or expressing an adverse opinion.

Front 40

Qulity control standars

Back 40

AICPA standards for establishing quality control policies and procedures that provide reasoanble assurance that all of a CPA firm's engagements are conducted in accordance with applicable professional stnadards.

Front 41

Registered Public accounting firm

Back 41

a public accounting firm registered with the PCAOB in accordance with SOX. Any CPA firm auditing SEC reporting companies mus be registered.

Front 42

Standard unqualified opinion

Back 42

Teh form of audit report issued when the examination was adequate in scope and the auditors believe that the financial steemtes present fairly the fianncial position, operating results, and cash flows in conformity with generally accepted acounting principles.

Front 43

Attest engagement team

Back 43

consists of individuals participation in the attest engagement, including those who perform concurring and secon partner reviews. It includes all employees and contractors retained by the firm who participate inthe attest engagement, irrespctive of their functional classification, except specialists, and individuals who perform only routined clerical functions, such as word processing and photocoying.

Front 44

Close Relative

Back 44

A parent, sibling, or nondependent child

Front 45

Direct financial interest

Back 45

A personal investment under the direct contro of the investor. The code of Professional Conduct prohibits CPAs from having any direct financial interests in their attest clients. Investmets made bya CPAs spouse or dependents also are regarded as direct financial interets of the CPA.

Front 46

Ethics Rulings

Back 46

Pronouncements of the AICPA that explain the application of Rules and Interpretations fo the Code of Professional conduct to specific factual circmstances involveing profesional ethics.

Front 47

Independence

Back 47

Includes two concepts- Independance of mind and independence in apperance

Front 48

Independence of mind

Back 48

The stae of mind that permits the perfomance of an atest service without being affected by influences that compromise professianl judgmet, therby allowing an individual to act with integrity and excercise objectivity and professional skepticisim.

Front 49

Independence ofin apperance

Back 49

the avoidance of acircumstances that could cause a reasonable and invormed thrid party, having knowledge of all relevant information, including safegaurds applied, to reasonably conclude that the integrity, objecivity, or professional skepticism of a firm or a member of the attest engagement team has been compromised.

Front 50

ndrect Financial interest

Back 50

an investment in which the specific investment desisions are not under the dirct control of the investor. The Code of Professional conduct allows CPAs to have indirect fiancial intersts in attest clients, as long as the investemnt is not material in relation to the CPAs net worth

Front 51

Joint closely held investment

Back 51

an investment in an entity or porperty by the member and the client that enables them to control the entity or property.

Front 52

mangaer

Back 52

a professional employee of the public accounting firm who either has continuing respnsibility for the overall planning and supervision of engagements or has the authority to determine that an engagemtn is complete subject to final partner approval, if required.

Front 53

Period of the professional engagement

Back 53

a period that begins when a member either signs an intitial engagement letter or other agreement to perform attest services or begins to perform an attest engagement for a client, whicerv is earlier. The period lasts for the entire duration of the professional relatiohsip and ends with the formal or informal notification, by either the member or the client, of the termination of the professional relationship or by the issuance of a report, whicher is later. Accordinly, the period odes not end with issuance of a report and recommence with the beginning of the following year's attest engagemen.

Front 54

Prosctve financial information

Back 54

Presentations of future financial position, reulst of operations, or cah flows.

Front 55

Significant influence

Back 55

20 percent or more interest in a company, the equity method

Front 56

Threats to independence

Back 56

circumstances that could impair independence. Th AICPA categorizes seven types of threats: self-review, Advocacy, adverse interst, familiarty, undue influence, financial self-interest, and management participation.