Introduction to Auditing

a standard of care expected to be demonstrated by a competent professional in his or her field of expertise, set by gaas but supplemented in specific implementation instances by the standard of care expected by a reasonably prudent auditor.

type of audit provided when an external auditor is engaged to perform an audit of the effectiveness of internal control over financial reporting (the audit of internal control over financial reporting) that is integrated with an audit of the financial statements.

a quasipublic board, appointed by the sec, to provide oversight of the firms that audit public companies registered with the sec. it has the authority to set auditing standards for the audits of public companies.

the governmental body with the oversight responsibility to ensure the proper and efficient operation of capital markets in the united states.

an adverse opinion should be expressed when the auditor believes that the financial statements taken as a whole are not presented fairly in conformity with gaap or when the auditor believes that the client's internal control over financial reporting is not effective.

see unqualified opinion.

gaap refers to generally accepted accounting principles for financial reporting. throughout the book we recognize that the criteria may be developed by either the fasb or the iasb. gaap has general acceptance and provides criteria by which to assess the fairness of a financial statement presentation.

as the primary professional organization for cpas, it has a number of committees to develop professional standards for the conduct of nonpublic company audits and other services performed by its members and to self-regulate the profession.

an organization affiliated with the aicpa that is dedicated to enhancing investor confidence and trust in the financial markets.

this organization issues international financial reporting standards (ifrs) and is working to be the one provider of accounting standards around the world.

performing an audit in accordance with generally accepted auditing standards (gaas) to provide reasonable assurance that the audited financial statements and related disclosures are presented in accordance with gaap and providing assurance that those financial statements are not materially misstated whether due to errors or fraud.

gaas refers to professional external auditing standards that are followed by auditors when conducting a financial statement audit. throughout the book, when we refer to professional external auditing standards, we will use the term gaas (generally accepted auditing standards). we recognize that gaas are set by several bodies, including the aicpa, the iaasb, and the pcaob.

occurs when an audit partner not otherwise involved in the audit independently reviews each audit to make sure that documented evidence supports the audit opinion. otherwise known as an engagement quality review.

occurs when an audit partner not otherwise involved in the audit independently reviews each audit to make sure that documented evidence supports the audit opinion. otherwise known as a concurring partner review.

a communication between the audit firm and the audit committee that states the scope of the work to be done on the audit so that there can be no doubt in the mind of the client, external auditor, or the court system as to the expectations agreed to by the external auditor and the client.

a review of one office of the audit firm by professionals from another office to assure that the policies and procedures established by the firm are being followed. professional skepticism an attitude that includes a questioning mind and critical assessment of audit evidence.

the record of audit procedures performed, relevant audit evidence obtained, and conclusions the auditor reached (terms such as working papers or workpapers are also sometimes used).

an intentional act involving the use of deception that results in a material misstatement of the financial statements.