Auditing and Assurance Services Chapter 1 Vocabulary

Vocabulary flashcards defining key terms, assertions, auditing standards, and regulatory entities from Chapter 1 of Auditing & Assurance Services.

Information Risk

The risk that the information disseminated by a company will be materially false or misleading due to unintentional errors or intentional mistakes such as fraud.

Business Risk

The risk that an entity will fail to meet its stated business objectives due to poor performance, such as failure to pay debt when due.

Financial Statement Auditing

A systematic process of objectively obtaining and evaluating evidence regarding assertions about economic actions and events to ascertain the degree of correspondence between the assertions and established criteria and communicating the results to interested users.

Attestation Engagement

A service where a practitioner is requested to examine whether management's assertions about some type of subject matter can be relied upon.

Assurance Services

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

Sustainability Reporting

Reporting relating to a company's performance on environmental matters and social responsibility (Planet and People).

Sarbanes-Oxley Act of 2002 (SOX)

Legislation passed by Congress in 2002 to address weaknesses in corporate financial reporting and enhance disclosure provisions to create a heightened sense of accountability.

Section 302 of Sarbanes-Oxley Act

A statutory provision requiring key company officials (CEO and CFO) to certify that they have read the financial statements, know of no false or misleading statements, and believe the statements accurately present the company's financial condition.

Accelerated Filers

Companies with a public float greater than or equal to $75\text{ million}$, which are required to make assertions on the effectiveness of internal controls and receive an auditor attestation report under Section 404.

Existence or Occurrence

A PCAOB management assertion that assets and liabilities included in the accounts exist and recorded transactions are valid and have actually occurred.

Completeness

A PCAOB management assertion that all balances and transactions have been recorded in the financial statements.

Valuation or Allocation

A PCAOB management assertion that assets, liabilities, and recorded transactions have been valued in accordance with GAAP.

Rights and Obligations

A PCAOB management assertion that the entity has a legal claim on all assets and revenues reported and a legal responsibility for all liabilities and expenses.

Presentation and Disclosure

A PCAOB management assertion that all accounts are presented in the appropriate place and all required information is disclosed in the statements and footnotes.

Professional Skepticism

An auditor's questioning mind and critical assessment of presentation by management and evidential matter gathered.

AS 1000

A 2024 PCAOB Auditing Standard providing significant detail about expectations for auditors when exercising professional skepticism, including objective evaluation of evidence and alertness to conditions indicating error or fraud.

Financial Statement Auditor

An external auditor or CPA who ensures that financial statements are reliable.

Internal Auditor

An auditor focused on improving operational efficiency and economy, as well as ensuring compliance with company policy and regulations.

Governmental Auditor

An auditor who ensures compliance with company and/or governmental rules and regulations.

Regulatory Auditor

An auditor (e.g., IRS, insurance, or bank regulatory auditor) who ensures compliance with governmental regulations for a specific industry.

Public Company Accounting Oversight Board (PCAOB)

An oversight body created by SOX to adopt auditing, attestation, quality control, ethics, and independence standards for SEC registrants, as well as register, inspect, investigate, and discipline public accounting firms.

Securities and Exchange Commission (SEC)

A U.S. federal government agency holding oversight responsibility for the PCAOB, aimed at protecting investors and requiring full disclosure of financial information by public companies.

Regulation S-X

The basic accounting regulations issued by the Securities and Exchange Commission (SEC).