Auditing chap 2 terms

American Institute of Certified Public Accountants (AICPA)

As related to professional auditing standards, the body charged with establishing auditing standards for the audits of non-issuers through Statements on Auditing Standards (SASs) issued by the Auditing Standards Board

appropriate

Characteristics related to the quality (relevance and reliability) of audit evidence

audit plan

A comprehensive list of the specific audit procedures that the audit team needs to perform to gather sufficient appropriate evidence on which to base their opinion on the financial statements

audit procedures

The specialized actions auditors take to obtain evidence in an engagement

auditing standards

The audit quality guides that apply to all audits

control risk

The likelihood that the client’s internal control policies and procedures fail to prevent or detect a material misstatement

detection risk

The likelihood that the auditors’ substantive procedures will fail to detect a material misstatement that exists within an account balance or class of transactions

due care

A level of performance that would be exercised by reasonable auditors in similar circumstances; auditors are expected to possess the skills and knowledge of others in their profession and are not expected to be infallible

engagement quality control review

An internal evaluation of the significant judgments made by the audit team and the conclusions reached in formulating its report on an engagement conducted by that firm

evidence

The information used by auditors in arriving at the conclusion on which the audit opinion is based, which includes the underlying accounting data and all available corroborating information

financial reporting framework

The financial reporting standards (i.e., GAAP, IFRS, etc.) adopted by management and, when appropriate, those charged with governance (audit committee or board of directors) in the preparation of the financial statements

generally accepted auditing standards (GAAS)

Standards that identify necessary qualifications and characteristics of auditors and guide the conduct of the audit examination

independence in appearance

The extent to which others (particularly financial statement users) perceive auditors to be independent

independence in fact

Auditors’ mental attitude and impartiality with respect to the client,

inspection

An evaluation of an accounting firm’s audit engagements and system of quality control conducted by the PCAOB and required for any firms providing auditing services to issuers

internal control over financial reporting

Policies and procedures implemented by an entity to prevent or detect material accounting frauds or errors and provide for their correction on a timely basis

issuer

An entity that offers registered securities, such as stocks and bonds, for sale to the general public (also known as a public entity). Issuers are subject to mandatory audit requirements

materiality

An amount or event that has a substantial likelihood to influence financial statement users’ decisions. Thus, material information is a synonym for important information. The emphasis is on the financial statement users’ point of view, not on the auditors’ or managers’ points of view

professional judgment

The application of relevant training, knowledge, and experience in making informed decisions about appropriate courses of action during the audit engagement

professional skepticism

A state of mind that is characterized by appropriate questioning and a critical assessment of audit evidence

Public Company Accounting Oversight Board (PCAOB)

As related to professional auditing standards, the body charged with establishing auditing standards for the audits of public entities through the issuance of Auditing Standards. The PCAOB is also responsible for inspecting firms that perform audits of issuers,

reasonable assurance

concept that requires auditors to provide a high level of confidence, but recognizes that a GAAS audit may not detect all material misstatements

risk of material misstatement

The combined probability that a material misstatement (error or fraud) will occur and not be prevented or detected on a timely basis by the entity’s internal controls. The risk of material misstatement is a combination of inherent and control risk

substantive procedures

Audit procedures used to obtain evidence with respect to the fairness of the account balance

sufficiency

The measure of the quantity of audit evidence (the number of transactions or components evaluated)

system of quality control

The policies and procedures implemented by a firm to provide with reasonable assurance that the firm and its personnel (1) comply with professional standards and applicable regulatory and legal requirements and (2) issue reports that are appropriate in the circumstances