Audit Reports and Professional Standards

These flashcards cover essential terms and definitions related to audit reports and professional standards that will help in preparing for the exam.

Audit Process

Engage and assess performance to form conclusions and report, involving steps like engagement acceptance, risk assessment, evidence gathering, forming conclusions, and reporting.

Professional Standards

Guidelines set by authoritative bodies, including AICPA SAS for nonissuers and PCAOB AS for issuers, to ensure quality and consistency in audits.

Audit Opinion

A formal statement from the auditor expressing whether financial statements are presented fairly according to the applicable framework.

Unmodified Opinion

The best possible opinion stating that financial statements are presented fairly in all material respects according to the applicable financial reporting framework.

Modified Opinion

An auditor's opinion when they are unable to obtain sufficient evidence or when financial statements contain material misstatements.

Sufficient Appropriate Evidence

Evidence that is needed to reduce audit risk to an acceptable low level, allowing the auditor to draw reasonable conclusions.

GAAS (Generally Accepted Auditing Standards)

A set of rules and principles established to guide auditors in the planning, performance, and reporting of audit engagements.

Materiality

Judgment regarding the significance of an amount, transaction, or discrepancy that could influence a user’s decision.

Emphasis-of-Matter Paragraph

Used in audit reports to refer to a matter appropriately presented or disclosed in the financial statements that is fundamental to users’ understanding.

Other-Matter Paragraph

Used to report matters other than those presented or disclosed in the financial statements which are relevant to the audit.

Subsequent Events

Events occurring after the balance sheet date but before the financial statements are issued, requiring evaluation for recognition or disclosure.

Audit Engagement

An agreement between an auditor and a client outlining the scope of the audit, responsibilities, and terms of acceptance.