Acct 427 Final Exam Review

A set of vocabulary flashcards covering the governance, risk assessment, audit procedures, and reporting concepts outlined for the Acct 427 Final Exam.

SEC vs FASB vs AICPA

The core organizations involved in governance, financial reporting standards, and professional regulation for accountants.

Attestation

A category of professional services provided by CPAs that includes specific definitions, service types, and report types.

Independence

A fundamental requirement for auditors that specifies when and how it applies to professional engagements.

Joint vs Proportional liability

Two different frameworks for determining auditor legal liability in the event of financial losses or errors.

Material misstatement and materiality

The threshold or magnitude of an omission or misstatement that would influence the judgment of a reasonable person relying on the information.

Inherent risk

The susceptibility of an assertion to a material misstatement before consideration of any related controls.

Control risk

The risk that a material misstatement will not be prevented, or detected and corrected, on a timely basis by the entity's internal control.

Audit risk

The risk that the auditor expresses an inappropriate audit opinion when the financial statements are materially misstated.

Detection risk

The risk that the procedures performed by the auditor will not detect a misstatement that exists and that could be material.

Fraud risk

A specific risk consideration involving intentional acts that result in a material misstatement in the financial statements.

Analytical vs substantive procedures

Different types of audit tests; the former involves evaluations of financial information through analysis of relationships, while the latter targets material misstatements at the assertion level.

Test of controls

Examples of procedures used to evaluate the operating effectiveness of controls in preventing or detecting material misstatements.

Material weakness vs Significant deficiency

Two levels of internal control failures; a material weakness is the more severe classification regarding the likelihood of a material misstatement not being prevented or detected.

IT controls & Client vs server

Information technology considerations in auditing, including what technology can and cannot do and the environment of the systems.

Sampling population

The entire set of data from which a sample is selected and about which the auditor wishes to draw conclusions.

Bank cutoff statements

Specific cash procedures used in bank reconciliations to verify transactions near the end of the reporting period.

Overstatement vs understatement

The risks associated with accounts receivable and other accounts where balances might be reported higher or lower than their actual value.

Unmodified vs modified vs adverse

The types of audit reports or opinions issued based on whether the financial statements are presented fairly in all material respects.

Going concern

A concept related to an entity's ability to continue in existence, involving specific consequences and disclosure requirements if that ability is in doubt.