Auditing and Assurance - CPA Intermediate Level Study Text

Flashcards created to review key concepts and terms related to auditing and assurance as covered in the CPA intermediate level study text.

Assurance Engagements

The expression of a conclusion intended to increase users' confidence in a subject matter or information.

Audit Engagement

The formal notification and agreement between an auditor and a client regarding the audit process.

Elements of Assurance Engagement

Includes a three-party relationship, an appropriate subject matter, sufficient evidence, suitable criteria, and a written report.

Non-Assurance Engagements

Engagements lacking the five elements of assurance, such as compilations and management advisory services.

Internal Control System

Processes put in place by management to ensure the reliability of financial reporting, effectiveness of operations, and compliance with laws.

Audit Evidence

Information obtained during an audit to support conclusions regarding financial statements.

Types of Assurance Engagements

Includes reasonable assurance, limited assurance, assertion-based, and direct reporting.

Going Concern

The assumption that a company will continue its operations for the foreseeable future and can meet its financial obligations.

Engagement Acceptance

The initial processes confirming the auditor's ability to conduct and accept a new audit engagement.

Management Letter

A letter summarizing the auditor's findings regarding a client's internal controls and recommendations for improvements.

Risk Assessment

The process of identifying and evaluating risks of material misstatement in financial statements.

Forensic Accounting

The application of accounting skills to investigate fraud or embezzlement and analyze financial information for legal proceedings.

Substantive Procedures

Audit tests to detect material misstatements in financial statements directly by examining account balances and transactions.

Test of Controls

Audit procedures to evaluate the effectiveness of internal controls in preventing or detecting material misstatements.

Materiality

The significance of financial information that could influence the decisions of users.

Audit Risk Model

A model used to assess the risk of an inappropriate audit opinion being expressed due to material misstatement.

Revenue Recognition Fraud

Manipulating financial statements by recording sales that did not occur or inflating revenue figures.

Management Assertions

Claims made by management regarding the accuracy and legitimacy of financial statements and related disclosures.

External Confirmation

Audit procedure that involves contacting third parties to verify certain information regarding transactions or balances.

Audit Report Types

Includes unqualified, qualified, adverse, and disclaimer opinions based on the auditor's findings.

ISA 315

International Standard on Auditing related to understanding the entity and its environment, including assessing the risk of material misstatement.

Engagement Quality Control Review

An evaluation of significant judgments made by the engagement team during the audit process.