Audit Final

risk assessment

management’s identification and anylsis of risks relevant to the preparation of financial statements in accordance with an applicable accounting framework

test of control

audit procedures to test the effectiveness of controls in support of a reduced assessed control risk

substantive test of transaction

audit procedures testing for monetary misstatements to determine whether the seven transaction-related audit objectives have been satisfied for each class of transactions

substantive analytical procedures

an analytical procedure in which the auditor develops an expectation of recorded amounts or ratios to provide evidence supporting an account balance

test of detailed balances

audit procedures testing for monetary misstatements to dtermine whether the nine balance-related audit objectives have been satisfied for each significant account balance

Sufficient & Appropriate Audit Evidence

the balance of the quantity and quality of audit evidence obtained to support the auditor's conclusions

Transaction Related Audit Objectives

seven audit objectives that must be met before the auditor can conclude that the total for any given class of transactions is fairly stated; the general transaction-related audit objectives are occurrence, completeness, accuracy, classification, timing, posting and summarization, and presentation

Evidence Mix

the combinarion of the types of tests to obtain sufficient appropriate evidence for a cycle: there are likely to be variantions in the mix from cycle to cycle depending on the circumstances of the audit

Audit Program

list of audit procedure for an audit area or an entire audit, including the timing and extent of the tests

Audit Procedures

refer to the spacific actions taken by auditors to gather evidence and assess the accuracy of finanial statements, ensuring compliance with established standards and regulations

Sample Size

the number of items or transactions selected from a population to conduct an audit test, ensuring that the sample is representative enough to draw valid conclusions.

items to Select

after determining a sample size, auditors choose specific items to test

Timing

refers to the scheduling of audit procedures to ensure that evidence is gathered at the appropriate time, maximizing the effectiveness of the audit process.

Segregation of duties

separation of the following activities in an organization:

1. custody of assets from accounting

2. authorization from custody of assets

3. operational responsibility from record keeping

4. IT duties from outside users of IT

Key Controls

controls that are expected to have greatest effect on meeting audit objetives; often referred to as identified or relevant conditions

Bill of lading

A document issued by a carrier acknowledging receipt of cargo for shipment. It serves as a contract between the shipper and the carrier and may include details such as the type, quantity, and destination of the goods.

Aged Trial Balance

a listing of the balances in the accounts receivable database at the balance sheet date broken down according to the amount of time passed between the date of sale and the balance sheet date

A/R Confirmation

a process where a company verifies the accuracy of its accounts receivable balances by obtaining confirmations directly from customers regarding their account status.

Postitive Confirmation

communication, addressed to the debtor, requesting that the recipient indicate whether the stated account balance is correct or incorrect and, if incorrect, by what amount

Negative Confrimation

communication, addressed to the debtor, requesting a response only if the recipient disagrees with the amount of the stated account balance

Bank Confirmation

a process where a company requests direct verification from its bank to confirm account balances and other relevant details.

Cutoff Bank Activity

the process of ensuring that all transactions occurring before the end of an accounting period are recorded in the correct period to avoid misstatements in financial statements.

Bank Reconcilitation

the monthly reconciliation, usually prepared by client personnel, of the differences between the cash balance recorded in the general ledger and the amount in the bank account

Financial Instruments

any tradable asset that might include cash, equity securities, debt securities, or derivative instruments

contingent liability ( 3 things that define a contingent liability)

1. there is a potential future payment to outside party or the impairment of an asset that resulted from an exisiting condition

2. There is uncertainty about the amount of the future payment or impairment

3. The outcome will be resolved by some future event or events

contingent commitment

agreements that the entity will hold to a fixed set of conditions, such as the purchase or sale of merchandise at a stated price, at a future date, regardless of what happens to profits or to the economy as a whole

remote, reasonsably possible, probably

categories of contingent liabilities

attorney letter

client’s attorney provides a letter confirming the existence of any pending or potential litigation, claims, or assessments that may affect the financial statements.

subsequent events

transactions and other pertinent events that occurred after the balance sheet date that affect the fair presentation or disclosure of the statements being audited

subsequent discovery of facts

auditor discovery that the financial statements are materially misstated or that the opinion on internal controls over financial reporting may not have been appropriate after they have been issued

MD&A

The MD&A section is a part of the Form 10-K filed by public companies, which accompanies the annual financial statements. It provides management's perspective on the financial results, including insights into operations, liquidity, and capital resources.

supplemental infromation accompanying F/S

Additional data or details provided to enhance the understanding of the financial statements, which may include schedules or disclosures.