Chapter 1 Auditing and Assurance Services Flashcards

A set of vocabulary flashcards covering basic concepts, assertions, regulatory frameworks, and professional rules from Chapter 1: Auditing and 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 (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 that relates to a company's performance regarding environmental impact (Planet) and social responsibility (People).

Sarbanes-Oxley Act of 2002

Legislation passed by Congress in 2002 to address corporate financial reporting weaknesses, establishing that the management team is responsible for the financial reporting process and the financial statements.

Section 302 of Sarbanes-Oxley Act

A provision requiring key company officials (CEO and CFO) to certify that they have read the financial statements, are not aware of any false or misleading statements, and believe the statements accurately present the company's financial condition.

Section 404 of Sarbanes-Oxley Act

A provision requiring auditors to issue an attestation report on internal controls over financial reporting of accelerated filers to provide assurance that internal controls are appropriately designed and operating effectively.

Existence or occurrence (1)

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

Completeness (2)

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

Valuation or allocation (3)

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

Rights and obligations (4)

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

Presentation and disclosure (5)

PCAOB assertion that all accounts are presented in the appropriate place and all information required has been 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 PCAOB Auditing Standard issued in 2024 providing significant detail regarding auditor expectations when exercising professional skepticism.

Financial Statement Auditor

External auditors (CPAs) whose primary responsibility is to ensure that financial statements are reliable.

Internal Auditor

Auditors whose role is to improve operational efficiency and economy and ensure compliance with company policy and regulations.

Governmental Auditor

Auditors tasked with ensuring compliance with company and/or governmental rules and regulations.

Regulatory Auditor

Auditors (such as IRS, insurance, or bank regulatory auditors) who ensure compliance with governmental regulations for a specific industry.

Uniform CPA Examination

Licensing examination effective Jan. 2024 comprising 3 mandatory core sections (AUD, FAR, REG) and 1 discipline section chosen from BAR, ISC, or TCP.

Public Company Accounting Oversight Board (PCAOB)

An organization created by SOX to establish auditing standards for SEC registrants and oversee, inspect, investigate, and discipline public accounting firms.

Securities and Exchange Commission (SEC)

A U.S. federal government agency with oversight responsibility for the PCAOB, aimed at protecting investors and preventing fraud in the sale of securities.

Regulation S-X

The SEC regulation covering basic accounting regulations.