AT-Quiz No. 1 – Auditing & Accountancy Fundamentals

Vocabulary flashcards covering key terms and concepts from the AT-Quiz No. 1 lecture notes on Philippine auditing and accountancy regulations.

Board of Accountancy (BoA)

The PRC-supervised body that regulates the CPA profession; its members must not be connected with accounting firms, CPA review centers, or universities offering CPA programs.

Certified Public Accountant (CPA) Examination

The licensure exam for accountants in the Philippines requiring at least a 75 % GWA with no subject below 65 % and other eligibility rules under RA 9298.

General Weighted Average (GWA)

The overall average score in the CPA exam; at least 75 % is required to pass.

Conditioned Candidate

An examinee who must retake only the failed subjects (scored 65 %–74 %) within two years of the preceding exam.

RA 9298 (Philippine Accountancy Act of 2004)

The law governing the accountancy profession, covering practice, licensure, CPE, and disciplinary actions.

Professional Regulation Commission (PRC)

Government agency that supervises the BoA and has authority to recommend, but not unilaterally execute, removal of BoA members.

PRC-CPE Council

Council composed of a chairperson and three members that oversees Continuing Professional Education for CPAs.

Assurance Engagement

A service in which a practitioner expresses a conclusion designed to enhance the degree of confidence of intended users about a subject matter.

Three-party Relationship

Element of assurance engagements involving the practitioner, the responsible party, and the intended users.

Responsible Party

The person(s) who prepare and are accountable for the subject matter of an assurance engagement.

Intended User

The person or class of persons for whom the practitioner’s report is prepared in an assurance engagement.

Related Services

Non-assurance engagements such as agreed-upon procedures (AUP) and compilation services.

Agreed-upon Procedures (AUP) Engagement

A service where specific procedures are performed and only factual findings are reported; no assurance is expressed.

Compilation Engagement

A service that involves presenting information in the form of financial statements without providing assurance.

Consultancy Engagement

Professional service using accounting expertise (not auditing) to analyze or improve client operations; may include compilations.

Operational Audit

A systematic review of efficiency and effectiveness of operations, aimed at reducing waste and improving performance.

Assumptions of Financial Statement Audit

Presumptions such as auditable data, absence of long-term conflict with management, and public benefit from audits.

Auditor’s Responsibility for Financial Statements

The auditor expresses an opinion but does not assume responsibility for the statements’ preparation or fair presentation.

Material GAAP Departure

A significant non-compliance with accounting standards that may lead to a qualified or adverse opinion.

Audit Opinion Types

Standard conclusions: unqualified, qualified, adverse, and disclaimer.

Professional Skepticism

An auditor’s critical, questioning mindset in assessing the sufficiency and appropriateness of audit evidence.

Management Assertions

Representations about financial statement elements; categories include existence, completeness, rights & obligations, valuation & allocation, and presentation & disclosure.

Valuation & Allocation Assertion

Statement that assets, liabilities, and equity interests are recorded at appropriate amounts; e.g., receivables at net realizable value.

Existence Assertion

Claim that assets, liabilities, and equity interests actually exist at the balance-sheet date.

Audit Risk Model

Framework stating Audit Risk = Inherent Risk × Control Risk × Detection Risk.

Inherent Risk

Susceptibility of an assertion to material misstatement before considering internal controls.

Control Risk

Risk that a misstatement could occur and not be prevented or detected by the entity’s internal control.

Detection Risk

Risk that auditors’ procedures will not detect a material misstatement that exists.

Audit Risk

Risk that the auditor expresses an inappropriate opinion when financial statements are materially misstated.

Limitations of Audit

Factors such as persuasive (not conclusive) evidence, sampling, and inherent control system limitations that restrict misstatement detection.

Persuasive Evidence

Audit evidence that supports conclusions but rarely provides absolute proof.

Philippine Standards on Auditing (PSAs)

Authoritative pronouncements governing audit practices; full compliance is required before claiming adherence.

Reasonable Assurance

A high but not absolute level of assurance that financial statements are free of material misstatement.

Misstatement

Difference between reported information and what is required for fair presentation; may be due to error or fraud.

Qualified Opinion

Audit opinion issued when financial statements are fairly presented except for a specific material issue not pervasive.

Adverse Opinion

Opinion stating financial statements are not fairly presented due to pervasive material misstatements.

Disclaimer of Opinion

Issued when the auditor cannot obtain sufficient appropriate evidence and is unable to form an opinion.