Audit

The purpose of financial reporting is to provide financial statements to aid management in making decisions

True
False
False
The auditee is the party performing the audit

True
False
False
Auditing does not include the function of preparing the financial statements

True
False
True
Providing assurance is the same thing as "lending of credibility".

True
False
True
Auditors are not responsible for disclosing business risks.

True
False
False
A compilation is a non-audit service provided by accountants which consists of writing up the financial statements without performing any evidence-gathering work

True
False
True
Information risk is the risk that the financial statements will not appropriately reflect the economic substance of the business activities.

True
False
True
attestation:
the lending of some credibility to financial or other information involving written assertions by professional auditors who serve as objective intermediaries.

auditee:
the company or other entity whose financial statements are being audited.

Certified General Accountants:
persons who have met the Certified General Accountants Association of Canada criteria for CGA credentials.

Certified Management Accountants:
persons who have met the Society of Management Accountants of Canada criteria for CMA credentials.

client:
person (company, board of directors, agency or some other person or group) who retains the auditor and pays the fee.

conflict of interest:
any relationship whereby an individual or his or her relative may benefit from a transaction within the individual's business relations where he or she has influenced the transaction or relationship.

expanded scope governmental auditing:
auditing that goes beyond an audit of financial reports and compliance with laws and regulations to include economy and efficiency and program results audits.

external auditors:
independent PAs who audit financial statements for the purpose of rendering an opinion.

financial reporting:
broad-based process of providing statements of financial position (balance sheets), statements of results of operations (income statements), statements of changes in financial position (cash flow statements), and accompanying disclosure notes (footnotes) to outside decision makers who have no internal source of information like the management of the company has.

information risk:
risk (probability) that the financial statements distributed by a company will be materially false and misleading.

internal auditing:
study of business operations for the purpose of making recommendations about the economic and efficient use of resources, effective achievement of business objectives and compliance with company policies. (see also management auditing, operational auditing, performance auditing)

internal auditors:
persons employed within organizations for audit assignments.

International Federation of Accountants (IFAC):
an organization dedicated to developing international auditing standards. IFAC publishes its own handbook on auditing standards referred to as international standards on auditing (ISAs). ISAs cover such issues as basic principles of auditing, auditor's reports, professional independence, reliance on other auditors abroad and professional qualifications.

international standard on auditing (ISA):
an auditing standard promulgated by IFAC and included in the IFAC Handbook.
management auditing:
study of business operations for the purpose of making recommendations about the economic and efficient use of resources, effective achievement of business objectives and compliance with company policies. (see also internal auditing, operational auditing, performance auditing)

operational auditing:
study of business operations for the purpose of making recommendations about the economic and efficient use of resources, effective achievement of business objectives and compliance with company policies. (see also internal auditing, management auditing, performance auditing)

peer review:
study of a firm's quality control policies and procedures, followed by a report on a firm's quality of audit practice.

performance auditing:
study of business operations for the purpose of making recommendations about the economic and efficient use of resources, effective achievement of business objectives and compliance with company policies. (see also internal auditing, management auditing, operational auditing)

quality review:
study of a firm's quality control policies and procedures; an "audit" of a firm's quality of audit practice.

The assurance standards require an understanding of the internal control structure for an information system

True
False
False
Audits encompass all assurance engagements including reviews.

True
False
False
An unqualified audit opinion means a "good" opinion, while a qualified opinion means a "bad" opinion

True
False
True
An adverse opinion states that the financial statements are not in accordance with GAAS

True
False
False
Professional skepticism is when the auditor does not believe anything client management says.

True
False
False
adverse opinion:
the opposite of an unqualified opinion, stating that financial statements are not in conformity with GAAP.

assurance engagement:
an engagement by a practitioner designed to report on the credibility of information, which is the responsibility of another party and which is referred to as the subject-matter, by evaluating that information against identified suitable criteria and expressing a conclusion.

assurance standards:
a general set of standards intended to guide assurance engagements.

audit procedures:
particular and specialized actions auditors take to obtain evidence in a specific audit engagement.

audit program:
a list of the audit procedures believed necessary to obtain sufficient, competent evidence that will serve as the basis for the audit report.

audit standards:
audit quality guides that remain the same through time and for all audits, including audits of computerized accounting systems.

control risk:
the probability that a material misstatement (error or irregularity) could occur and not be prevented or detected on a timely basis by the company's internal control structure policies and procedures

disclaimer of opinion:
lowest level of assurance; "no assurance." Auditors explicitly state that they give no opinion and no assurance, thus taking no responsibility for a report on the fair presentation of financial statements in conformity with GAAP.

evidence:
all the influences upon the minds of auditors which ultimately guide their decisions.

harmonization:
accountants' and regulators' interest in making accounting and auditing standards coordinated, if not uniform, throughout the world.

interim date:
a date some weeks or months before the auditee's fiscal year-end.

internal control structure:
consists of a company's control environment, accounting system and control procedures. The existence of a satisfactory internal control structure reduces the probability of errors and irregularities in the accounts.