Audit Ch 1 Auditing and Assurance Services

information risk

the probability that the information circulated by a company will be false or misleading

Business risk

The risk that an entity will fail to meet its objectives

assurance service

Independent professional services that improve the quality of information, or its context, for decision makers.

auditing

The systematic process of objectively obtaining and evaluating evidence regarding assertions about economic actions and events to ascertain the degree of correspondence between the assertions and established criteria and communicating the results to interested users.

attestation engagement

An engagement where a practitioner is requested to examine whether management’s assertions about some type of subject matter can be relied upon.

Existence or occurrence

Assets and liabilities included in the accounts exist and recorded transactions are valid and have actually occurred

Completeness

All balances and transactions have been recorded in the financial statements.

Valuation or allocation

Assets, liabilities and recorded transactions have been valued in accordance with GAAP.

Rights and obligations

Entity has a legal claim on all assets and revenues reported and has a legal responsibility for all liabilities and expenses.

Presentation and disclosure

All accounts are presented in the appropriate place and all information required has been disclosed in the statements and footnotes.

Professional Skepticism

Refers to an auditor’s questioning mindset towards representations made by management and evidential matter

gathered

– Inquiry alone is never enough. The auditor must obtain sufficient

corroborative evidence.

– Unusual financial trends need investigation.

– Documents are always checked for authenticity or possible alteration.

– Ask questions, get answers, then verify the answers.

What are the assertions?

existence, completeness, valuation, rights and obligations

Cutoff

Correct period?

Accuracy

Correct amount?

Classification

Correct account?