Big Data and Financial Auditing: Risks, Assurance, and Assertions

What are the four environmental conditions in the big data world that increase user demand for information?

Complexity, Remoteness, Time Sensitivity, and Consequences.

What is information risk?

The probability that the information circulated by a company will be false or misleading.

What is the role of information professionals in the context of information risk?

They serve as independent and objective intermediaries who lend credibility to information.

What is attestation in auditing?

The assurance provided for specific assertions made by management.

What is the definition of auditing?

The systematic process of obtaining and evaluating evidence regarding assertions about economic actions and events.

What are assurance services according to the AICPA?

Any independent professional service that improves the quality of information or its context for decision makers.

What is a review engagement?

An engagement that performs limited procedures to give limited assurance.

What are agreed-upon procedures in attestation engagements?

Procedures performed only as requested by the client, resulting in a report of findings without opinions.

What is pro forma financial information?

An evaluation of how past financial statements would have looked if a transaction had already occurred.

What does compliance attestation evaluate?

Whether a client is following specific rules, such as debt covenants or regulatory requirements.

What is the purpose of SOC 1 and SOC 2 reports?

To evaluate internal controls at service organizations.

What are management's financial statement assertions?

Claims made by management regarding the accuracy and completeness of financial statements.

What does the assertion of existence mean?

All assets, liabilities, and equity interests actually exist.

What is the completeness assertion?

All transactions and events that should have been recorded have been recorded.

What does the valuation assertion refer to?

Assets and liabilities are valued according to relevant financial reporting standards.

What is the rights and obligations assertion?

The entity is entitled to all rights of the assets and liabilities are the legal responsibility of the entity.

What is professional skepticism in auditing?

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

Why is professional skepticism important?

It ensures that auditors do not accept management assertions without corroboration.

What is the significance of identifying significant accounts in auditing?

It helps auditors focus on areas with a reasonable possibility of material misstatement.

What is the cutoff assertion in auditing?

Refers to accounting for transactions in the proper period.

What is the accuracy assertion?

Refers to the appropriate recording of transactions at the correct amount.

What is the presentation and disclosure assertion?

All transactions have been presented correctly and relevant information disclosed to users.

What are the key questions auditors must answer about each assertion?

They relate to the relevance of each assertion and the potential for material misstatement.

What is the importance of evidence in auditing?

Evidence is obtained via audit procedures and evaluated with professional judgment to support assertions.

What is the role of decision makers in assurance services?

They are the consumers of assurance services and represent the customer focus of professional services.

What is the systematic process in auditing?

A logical sequence of steps to evaluate evidence regarding assertions.

What does the term 'assertions' refer to in financial statements?

Explicit representations made by management about financial statement amounts and disclosures.