Auditing Flashcards

Flashcards for review based on lecture notes about auditing.

Assurance Engagement

An engagement where a practitioner expresses a conclusion designed to enhance the degree of confidence of intended users about the outcome of an evaluation or measurement.

Reasonable Assurance

Assurance level where sufficient appropriate evidence is gathered to draw reasonable conclusions, affirms subject matter conforms in all material respects, and gives a positively worded opinion.

Reasonable Assurance

An example of this is a statutory audit.

Limited Assurance

Assurance level where sufficient appropriate evidence is gathered to draw limited conclusions, determine subject matter is plausible and gives a negatively worded assurance opinion.

Limited Assurance

An example of this is a review engagement

Practitioner

Broader than the term 'auditor,' relating to practitioners performing audit or review engagements with respect to historical financial information.

Responsible Party

Person responsible for the subject matter in a direct reporting engagement.

Intended Users

The person, persons, or class of persons for whom the practitioner prepares the assurance report.

Subject Matter

Can include financial or non-financial performance, physical characteristics, systems and processes, or behavior.

Suitable Criteria

Benchmarks used to evaluate or measure the subject matter.

Sufficient appropriate evidence

Planning and performing an engagement with professional skepticism to obtain sufficient evidence about whether the subject matter information is free of material misstatement.

Written assurance report

Providing a written report containing a conclusion that conveys the assurance obtained about the subject matter information.

Review Engagement Objective

Carried out to give assurance as to whether the subject matter information is free from material misstatement.

Agreed Upon Procedure

Auditor carries out procedures of an audit nature and reports on factual findings, restricted to parties who agreed to the procedures.

Compilations

Accountant uses accounting expertise to collect, classify, and summarise financial information without testing the underlying assertions.

Compilations

Verification of Insurance claims is an example

Review Engagement

Has a Limited Assurance level

Agreed upon procedure

Level of assurance is No assurance.

Compilations

Level of assurance is No Assurance.

Definition of Auditing

Independent examination of evidence to give the reader of financial statements confidence as to their truth and fairness.

Definition of Auditing

An advantage of this is the ability to easily access loans and credit.

Definition of Auditing

An disadvantage of this is the potential of disruption of work during audit

Definition of Auditing

An inherent limitation of audit is that it's not a guarantee of future viability.

Limitations of an audit

An inherent limitation of audit is the impracticability for examining all items

Internal Audit

Designed to add value and improve an organization's operations.

External Audit

Independent examination of financial statements, usually for statutory purposes.

Internal Audit - Scope of Work

Reviews the operations and systems of the entity.

External Audit - Scope of Work

Examines the financial statements and accounting records.

Internal Audit- Appointment

Appointed by Management.

External Audit- Appointment

Appointed by Shareholders.

Internal Audit-Level of assurance

Limited level of assurance.

External Audit-Level of assurance

Reasonable level of assurance.

Internal Audit-User of Report

Mainly used by management.

External Audit-User of Report

Used by shareholders, investors, and creditors.

Internal Audit-Report Format

No specific format required.

External Audit-Report Format

A specific format is required.

Internal Audit-Legal Basis

Not required by law.

External Audit-Legal Basis

Required by law.

Statutory Audit

Made compulsory by law.

Non-statutory Audit

Not specifically required by law, carried out at the request of an interested party.

Interim Audit

Conducted for part of the accounting year with some interim purpose.

Continuous Audit

Deploying an engagement team continuously or at fixed intervals throughout the financial year.

Periodic Audit

Done at the close of the financial year.

Qualification of Auditor

Must be a mamber of the Institute of Chartered Accountants,Ghana

Disqualification of Auditor

Cannot be an infant.

Duties of an Auditor

Act in such a manner as faithful, diligent, careful, and ordinarily skillful auditors would.

Rights of the Auditor

Right of access at all times to books of accounts and vouchers of the company.

Appointment of Auditors

Auditors shall be appointed by an ordinary resolution of the company

The remuneration ofthe Auditors

May be fixed by the directors or the Registrar.

Definition: Corporate Goverance

Is the way in which companies are managed and controlled