Chapter 1 Auditing and Assurance Services

information risk

The risk that the financial information could be materially wrong or misleading.

auditor

An independent professional who checks the accuracy of management's financial statements.

assertion

A claim or statement made by management regarding the financial statements.

professional skepticism

A questioning mind that auditors should use to critically evaluate evidence.

GAAP

Generally Accepted Accounting Principles, the standards for financial reporting.

attestation engagement

An examination of a specific subject matter related to a claim made by management.

assurance services

Independent services that improve the quality or usefulness of information.

sustainability reporting

Reporting that focuses on a company's environmental impact and social responsibility.

ESG

Environmental, Social, and Governance - a set of standards for a company's operations.

Sarbanes-Oxley Act

A U.S. law enacted to enhance corporate accountability and financial disclosure.

existence assertion

Management's claim that an asset or liability exists.

completeness assertion

Management's claim that all transactions or balances are included.

valuation assertion

Management's claim that the assets and liabilities are valued correctly.

rights and obligations assertion

Management's claim that the company owns the assets and owes the liabilities.

presentation and disclosure assertion

Management's claim that financial information is properly presented and disclosed.

audit quality

Refers to the thoroughness, independence, and skill of an audit process.

Big Four

The four largest international accounting and professional services firms: Deloitte, EY, KPMG, PwC.

external auditors

Independent auditors who are not employed by the organization being audited.

internal auditors

Auditors who work for the organization and evaluate its internal controls.

professional standards

Rules and guidelines established to govern the professionalism of auditors.

SEC

Securities and Exchange Commission, a federal agency responsible for enforcing securities laws.

PCAOB

Public Company Accounting Oversight Board, which oversees auditors of public companies.