Audit Planning and Misstatements in FS Audit

A set of vocabulary flashcards covering the fundamental concepts of audit planning, assertions, risks of material misstatement, and accounting errors based on the Chapter 1 lecture notes.

Auditing

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

Overall Objectives of Audit

To obtain reasonable assurance about whether the financial statements (FS) as a whole are free from material misstatements, whether due to fraud or error, and to report on the FS in accordance with the auditor's findings.

Transaction Assertions (SCOTS)

Occurrence, Completeness, Accuracy, Cut-off, and Classification/Presentation.

Account Balances Assertions (RCEV)

Existence, Rights and obligations, Completeness, and Valuation, Accuracy and Allocation.

Audit Risk

The risk that the auditor expresses an inappropriate audit opinion when the financial statements are materially misstated.

Risks of Material Misstatement (ROMM)

The combination of Inherent Risk and Control Risk as assessed by the auditor.

Detection Risk

The risk that the procedures performed by the auditor to reduce audit risk to an acceptably low level will not detect a misstatement that exists and that could be material.

Risk-Based Audit Process

A three-phase process consisting of Risk Assessment, Risk Response, and Conclusion and Reporting.

Audit Strategy

A plan that sets the scope, timing, and direction of the audit and guides the development of the audit plan.

Risk Assessment Procedures

Procedures that include inquiries, analytical procedures, and observation and inspection to provide a basis for identifying and assessing risks of material misstatement.

PSA 300

The Philippine Standard on Auditing related to Audit Planning and Risk Assessment.

Fraud

Intentional acts involving the use of deception to obtain an unjust or illegal advantage, categorized as fraudulent financial reporting or misappropriation of assets.

Error

Unintentional misstatements in the financial statements, such as omissions or misapplications of accounting policies.

Accounting Policies (AP)

Specific principles, bases, conventions, rules, and practices applied by an entity in preparing and presenting financial statements.

Change in Accounting Estimates (CAE)

Adjustments of the carrying amount of an asset or a liability, or the amount of the periodic consumption of an asset, that results from the assessment of the present status of, and expected future benefits and obligations associated with, assets and liabilities.

Prior Period Errors

Omissions from and misstatement in the entity's financial statements for one or more prior periods arising from a failure to use, or misuse of, reliable information.

Pre-Engagement Procedures

Activities performed before the audit starts, including independence assessment, communications with the predecessor auditor, and signing the Engagement Letter.