Auditing Standards and Concepts Flashcards

Vocabulary flashcards covering fundamental auditing terms, standards, principles, and risk concepts from the lecture notes.

Public Company Accounting Oversight Board (PCAOB)

An organization that provides external and independent oversight over the audits of public entities or issuers.

Issuer

A public company.

Holding Foreign Companies Accountable Act of 2020

Legislation that established a 3-year deadline for permitting inspections of foreign company audits or facing forced delisting from US stock exchanges.

Generally Accepted Auditing Standards (GAAS)

Standards that identify necessary qualifications and characteristics of auditors and guide the conduct of the audit examination to obtain reasonable assurance that financial statements are free of material misstatements.

Audit Procedure

Particular actions that auditors take to obtain evidence in a specific audit engagement.

Auditing Standards

Quality guides to the audit that can apply to all audits.

Independence

Maintaining an unbiased and impartial mental attitude ('state of mind') and appearing unbiased from the perspective of financial statement users.

Due Care

The level of performance that would be exercised by reasonable auditors in similar circumstances.

Professional Skepticism

A state of mind characterized by appropriate questioning and a critical assessment of audit evidence.

Professional Judgment

The application of relevant training, knowledge, and experience in making informed decisions about appropriate courses of action during the audit engagement.

Reasonable Assurance

A high level of assurance recognizing that a GAAS audit may not detect all material misstatements and that auditors are not insurers or guarantors.

Materiality

The dollar amount that would influence the lending or investing decisions of financial statement users.

Risk Assessment

The process of understanding the client, its operating environment, and its industry to help auditors determine the nature, timing, and extent of further audit procedures.

Internal Control

Policies and procedures implemented by an entity to prevent or detect material accounting frauds or errors in accounts.

Inherent Risk

The probability that a material misstatement, either an error or fraud, will occur.

Control Risk

The probability that a material misstatement, whether an error or fraud, will not be prevented or detected on a timely basis by the entity's internal controls.

Substantive Procedures

Further audit procedures used to obtain evidence with respect to the fairness of the account balance.

Audit Evidence

Information used by auditors in arriving at the conclusion on which to base the audit opinion, including underlying accounting data and corroborating information.

Detection Risk

The risk that the audit team's substantive procedures will fail to detect a material misstatement.

Critical Audit Matters

Audit report items that involved challenging, subjective, or complex judgments.

Financial Reporting Framework

A set of criteria used to determine the measurement, recognition, presentation, and disclosure of material items in the financial statements (such as GAAP or IFRS).

System of Quality Management

System designed to provide a firm reasonable assurance that personnel comply with professional standards and applicable regulatory and legal requirements, and issue appropriate reports.