Chapter 1

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Accounting

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41 Terms

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Managemnet

is responsible for providing reliable Information to users.

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Audits information

prepped by federal government agencies before its submitted to congress.

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Criteria

can be the level of input or output errors.

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Audit assurance

is valued because the information is complete, accurate and unbiased.

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Information

gathered is often relied on others, when its obtained from others the likelihood of It being intentionally or unintentionally misstated increases.

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operational efficiency

Evaluates the and effectiveness of federal programs.

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revenue agents

Internal : auditors who work for the IRS and conduct examinations of taxpayers returns.

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RFR

Auditing has no effect on or BR, but can have a significant effect on information risk.

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Attestation services

: a type of assurance service in which the CPA firm issues a report about a subject matter or assertion that is made by another party.

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Assurance service

: Is an independent professional service that improves the quality of information for decision makers.

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evaluation of evidence

Auditing: Is the accumulation and about information to determine and report on the degree of correspondence between the information and established criteria.

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Operational audits

: evaluates the efficiency and effectiveness of any part of an organizations operating procedures and methods, gives recommendations for improving operations.

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Auditors

focus on determining whether recorded information properly reflects the economic events that occurred during the accounting period.

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Financial statement audits

: conducted to determine whether financial statements are stated in accordance with specific criteria.

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Compliance audit

: conducted to determine whether the auditee is following specific procedures, rules, or regulations set by some higher authority.

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Internal control

over financial reporting: an engagement in which the auditor reports in the effectiveness of internal control over financial reporting; such reports are required for accelerated filer public companies under SOX 404.

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Auditors

must have the expertise in accumulation and interpretation of audit evidence.

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Financial statement audits

are highly technical.

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Audit

adds little to no value if the individual is biased towards any of the information.

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auditing

Is the accumulation and evaluation of evidence about information to determine and report on the degree of correspondence between the information and established criteria

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independent auditors

CPAs or firms that perform audits of commercial and noncommercial entities

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evidence

any information used by the auditor to determine whether the information being audited is stated in accordance with established criteria

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audit report

communication of auditors findings to its users

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accounting

the recording, classifying, and summarizing of economic events in a logical manner for the purpose of providing financial information for decision making

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risk free rate

the rate the bank could earn by investing in treasury notes for the same length of time as business loans

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business risk for the customer

risk reflects the possibility that the business will not be able to repay its loan because of economic or business conditions (recession, management decisions, competition)

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information risk

reflects the possibility that the information was inaccurate

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information risk

the risk that information upon which a business decision was made is inaccurate

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assurance service

Is an independent professional service that improves the quality of information for decision makers

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attestation services

a type of assurance service in which the CPA firm issues a report about a subject matter or assertion that is made by another party

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audit of historical financial statements

a form of attestation service in which the auditor issues a written report stating whether the financial statements are in material conformity with accounting standards

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internal control over financial reporting

an engagement in which the auditor reports in the effectiveness of internal control over financial reporting; such reports are required for accelerated filer public companies under SOX 404

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review of historical financial statements

management asserts that the statements are fairly stated in accordance wiht accounting standards, the same as an audit, but a lower level of assurance is needed

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operational audits

evaluates the efficiency and effectiveness of any part of an organizations operating procedures and methods, gives recommendations for improving operations

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compliance audit

conducted to determine whether the auditee is following specific procedures, rules, or regulations set by some higher authority

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financial statement audits

conducted to determine whether financial statements are stated in accordance with specific criteria

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Certified public accounting firms

responsible for auditing historical financial statements of all publicly traded companies, large, small and noncommercial organizations

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Government accountability office auditors

an auditor working for the US government accountability office (GAO), a nonpartisan agency in the legislative branch of the federal government

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Internal revenue agents

auditors who work for the IRS and conduct examinations of taxpayers returns

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Internal auditors

auditors employed by a company to audit for the companies board of directors and management

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Certified Public Accountant

a person who has met state regulatory requirements, including passing the Uniform CPA exam, and thus has been certified; a CPA may have their primary responsibility the performance of the audit function on historical financial statements of commercial and noncommercial financial entities