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Auditing Vocab

Subject : business-skills
Instructions:
  • Answer 50 questions in 15 minutes.
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  • Match each statement with the correct term.
  • Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. The risk that material misstatements that could occur will not be prevented - or detected and corrected - by internal controls.






2. The probability that the true but unknown measure of the characteristic of interest is within specified limits.






3. A deficiency in internal control exists when the design or operation of a control does not allow management or employees - in the normal course of performing their assigned functions - to prevent - or detect and correct misstatements on a timely basi






4. Refers to the nature - timing - and extent of audit procedures - when nature refers to the type of evidence; timing refers to when the evidence will be gathered; and extent refers to how much of the type of evidence will be evaluated.






5. Audit procedures performed to test material misstatements in an account balance - transaction class - or disclosure component of the financial statements.






6. A service when a practitioner is engaged to issue or does issue a report on a subject matter - or an assertion about subject matter - that is the responsibility of another party. Encompasses financial statement audits.






7. The magnitude of an omission or misstatement of accounting information that - in light of surrounding circumstances - makes it probable that the judgment of a reasonable person relying on the information would have been changed or influenced.






8. Substantive tests that concentrate on the details of items contained in the account balance and disclosures.






9. An audit of both financial statements and internal control over financial reporting - provided by the external auditor. Required for public companies.






10. The extrapolation of sample results to the population; represents the auditors 'best estimate' of the misstatement in the sampling population






11. A management letter is a report to management containing the auditors' recommendations for correcting any deficiencies disclosed by the auditors' consideration of internal control. The management letter also provides recommendations on where the comp






12. The auditor's decision to rely on the entity's controls - test those controls - and reduce the direct tests of the financial statement accounts.






13. The possibility that the sample drawn is not representative of the population and that - as a result - the auditor reaches an incorrect conclusion about the reliability of the control - the account balance - or class of transactions based on the samp






14. A process that assesses the quality of internal control performance over time.






15. Test of transactions that both evaluate the effectiveness of controls and detect monetary errors.






16. Accounting principles that are generally accepted for the preparation of financial statements in the United States. GAAP standards are currently issued primarily by the FASB - with oversight and influence by the SEC.






17. The process of obtaining and evaluating direct communication from a third party in response to a request for information about a particular item affecting financial statement assertions.






18. Sampling that uses the laws of probability to select and evaluate the results of an audit sample - thereby permitting the auditor to quantify the sampling risk for the purpose of reaching a conclusion about the population.






19. An instance where a financial statement assertion is not in accordance with the criteria against which it is audited (e.g: GAAP). Misstatements may be classified as fraud (intentional) - other illegal acts such as noncompliance with laws and regulati






20. A process designed by - or under the supervision of - the company's principal executive and principal financial officers - or persons performing similar functions - and effected by the company's board of directors - management - and other personnel -






21. Evaluations of financial information made by a study of plausible relationships among both financial and nonfinancial data.






22. The risk that material misstatements that could occur will not be prevented - or detected and corrected - by internal controls.






23. The process of obtaining and evaluating direct communication from a third party in response to a request for information about a particular item affecting financial statement assertions.






24. Issued when auditors do not express an opinion on the fairness of the entity's financial statements. Can be issued for pervasive going-concern uncertainties - pervasive scope limitations - and situations in which the auditors are not independent.






25. Controls that relate to the overall information processing environment and have a pervasive effect on the entity's computer operations.






26. A term that implies some risk that a material misstatement could be present in the financial statements without the auditor detecting it - even when the auditor has exercised due care.






27. A subcommittee of the board of directors that is responsible for the financial reporting and disclosure process.






28. The auditor's opinion that the financial statements present fairly - in all material respects - in accordance with generally accepted accounting principles (or other comprehensive basis of accounting) - except for a material misstatement that does no






29. An event occurring between the balance sheet date and the audit report release date - Type I - Type II






30. A letter that formalizes the contract between the auditor and the client and outlines the responsibilities of both parties.






31. A deficiency in internal control exists when the design or operation of a control does not allow management or employees - in the normal course of performing their assigned functions - to prevent - or detect and correct misstatements on a timely basi






32. The policies and procedures that help ensure that management's directives are carried out.






33. Attribute sampling techniques used to estimate the dollar amount of misstatement for a class of transactions or an account balance.






34. Existing condition or set of circumstances involving uncertainty about a possible loss that will ultimately be resolved when some future event occurs or fails to occur.






35. The amount of misstatement that the auditor believes exists in the population.






36. The risk that the sample supports the conclusion that the control is not operating effectively when it actually is or that the recorded account balance is materially misstated when it is not materially misstated.






37. Tests to detect errors or fraud in individual transactions.






38. Standards regarding the conduct of financial statement auditing for public companies. Currently - consist primarily of standards and statements established by the AICPA's Auditing Standards Board - as these statements and standards were adopted by th






39. The concept that an audit done in accordance with auditing standards may fail to detect a material misstatement in a client's financial statements. In an auditing context this term has been defined to mean a high - but not absolute level of assurance






40. Audit procedures performed to test the operating effectiveness of controls in preventing or detecting and correcting - material misstatements at the relevant assertion level.






41. Financial statements prepared under regulatory - tax - cash basis - or other definitive criteria having substantial support.






42. A systematic process of (1) objectively obtaining an evaluating evidence regarding assertions about economic actions and events to ascertain the degree of correspondence between those assertions and established criteria and (2) communicating the resu






43. A weakness in the design or operation of a control such that management or employeesm in the normal course of performing their assigned functions - fail to prevent - or detect misstatements on a timely basis.






44. A system or code of conduct based on moral duties and obligations that indicates how an individual should behave.






45. The policies and procedures that help ensure that management's directives are carried out.






46. The total of the projected misstatement plus the allowance for sampling risk.






47. Audit evidence that includes minutes of meetings; confirmations from third parties; industry analysts' reports; comparable data about competitors (benchmarking); controls manuals; information obtained by the auditor from such audit procedures as inqu






48. The auditor's decision to rely on the entity's controls - test those controls - and reduce the direct tests of the financial statement accounts.






49. A letter that corroborates oral representations made to the auditor by management or by other auditors and documents the continued appropriateness of such representations.






50. The auditor's opinion that the financial statements do not present fairly in accordance with generally accepted accounting principles (or other comprehensive basis of accounting) due to a pervasively material misstatement.







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