Audit of Financial Statements

Vocabulary-style flashcards covering the definitions, types, objectives, and limitations of financial statement audits as presented in the Chapter 2 lecture notes.

Auditing

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

Objectivity

A combination of impartiality, intellectual honesty, and a freedom from conflicts of interest.

Assertions

Representations of management, explicit or otherwise, that are embodied in financial statement components, records, or systems.

Established Criteria (Financial Statement Audits)

Benchmarks used by auditors to express an opinion, which are generally accepted accounting principles in the context of financial statement audits.

Financial Statement Audit

The gathering of evidence on assertions embodied in the financial statements of an entity to determine if they adhere to the Philippine financial reporting framework or another comprehensive framework.

Operational Audits

A systematic review of an organization's activities to assess performance in terms of efficiency, effectiveness, and economy, identifying opportunities for improvement.

Compliance Audits

An audit used to determine whether a person or entity has adhered to provisions of a contract, laws, and regulations.

Internal Audits

An independent appraisal function established within an organization to examine and evaluate its activities as a service to the organization.

Government Audits

An audit to determine if government funds are handled properly and in compliance with laws, and if agency programs are conducted efficiently and economically.

Reasonable Assurance

The objective of an independent auditor to obtain high but not absolute certainty that financial statements as a whole are free from material misstatement, whether due to fraud or error.

Information Risk

The risk that information used for business decisions is inaccurate, caused by factors like remoteness of users, bias of providers, voluminous data, and complex transactions.

Nature of Financial Reporting

One of the limitations of an audit involving management judgment in applying the requirements of the framework and subjective decisions or assessments.

Nature of Audit Procedures

A limitation of an audit where there are practical and legal limitations on the auditor's ability to obtain evidence, such as management not providing all necessary information.

Future Viability

A matter on which the auditor does not express an opinion, as an audit is not a guarantee of the entity's continued existence.