ACCT 461 Chapter 1

assurance

Lending credibility to information by independent and objective professionals

assurance services

Broad set of information including nonfinancial information. Used by targeted, small groups of people

attestation

Assurance provided for specific assertions made by management

attestation engagement

Practitioner engaged to issue a report on subject matter OR an assertion about subject matter that is the responsbility of another party

Report findings on subject matter and express an opinion

auditing

Assertions are made in the company’s financial statements

business risk

The risk that an entity will fail to meet its objective; increases from low quality information

completeness

All balances and transactions have been completely recorded in F.S

cutoff

The date- usually refers to the year end balance sheet date

existence

Assets and liabilities in that account exist

financial reporting

Process of providing statements of financial position and accompanying disclosures to outside decision makers; a company’s accountants perform this function under management direction

information risk

Materially false, misleading, or overly optimistic; normally given by a company by management

internal auditing

Audit the internal company

occurrence

Events giving rise to transactions have occurred; another label for existence

operational auditing

Same as internal audit

presentation and disclosure

All accounts are presented in the appropriate place and all information required has been disclosed in the statements and footnotes

professional skepticism

Auditor’s questioning mindset towards assertions made by management and evidential matter gathered by themselves

relevant assertion

Reasonable possibility that a material misstatement exists related to that assertion for the significant account or footnote disclosure being audited

rights and obligations

Entity has a legal claim on all asserts and has a legal responsibility for all liabilities

significant accounts

F.S. account or footnote disclosure that could contain a material misstatement

substantial equivalency

Process through which CPAs licensed in one state can practice in another state

system generated reports

Any report that is generated by the audit client’s information systems that is used to execute its internal control procedures or produce its financial statement

valuation or allocation

Balances are reported/valued at the proper amount in accordance with GAAP