Audit Question terms

Professional Skepticism

An attitude that includes a questioning mind, being alert to conditions that may indicate possible misstatement due to error or fraud, and a critical assessment of audit evidence.

Management Assertions

Explicit or implicit representations made by management that are embodied in the financial statements and disclosures.

Completeness

An assertion that all transactions, assets, liabilities, and equity interests that should have been recorded are included.

Existence or Occurrence

An assertion that recorded assets, liabilities, and equity interests actually exist, and recorded transactions have occurred and pertain to the entity.

Valuation or Allocation

An assertion that assets, liabilities, and equity interests are included in the financial statements at appropriate amounts and any resulting valuation adjustments are properly recorded.

Rights and Obligations

An assertion that the entity holds or controls the rights to recorded assets, and liabilities are the true obligations of the entity.

Presentation and Disclosure

An assertion that components of the financial statements are appropriately classified, described, and clearly presented with all required disclosures.

Statements on Standards for Attestation Engagements (SSAE)

Standards issued by the AICPA that govern attestation engagements where a practitioner expresses an opinion or conclusion about subject matter (or an assertion) other than historical financial statements (e.g., warehouse square footage).

Statements on Auditing Standards (SAS)

Professional standards issued by the AICPA Auditing Standards Board (ASB) for conducting financial statement audits of nonissuers (private companies).

PCAOB AS 2201

A standard established by the Public Company Accounting Oversight Board governing audits of internal control over financial reporting that is integrated with an audit of financial statements for public companies (issuers).

Assurance Services

Independent professional services that improve the quality or context of information for decision-makers.

Audit Evidence Reliability Hierarchy

The principle that evidence obtained directly from independent external sources is generally more reliable than evidence obtained solely from internal, client-generated documents.

Sub-ledger (Subordinate Ledger)

A detailed accounting record that supports a corresponding summary or control account in the general ledger (e.g., individual equipment listings supporting the Property, Plant, and Equipment account).

Tracing

An audit procedure moving from source documents/physical items forward to the accounting records to test for completeness (understatement).

Vouching

An audit procedure moving backward from accounting records to source documents/physical items to test for existence/occurrence (overstatement).