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Auditing Vocab

Subject : business-skills
Instructions:
  • Answer 50 questions in 15 minutes.
  • If you are not ready to take this test, you can study here.
  • 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. A transaction being traced by an auditor from origination through the entity's information system until it is reflected in the entity's financial reports; it encompasses the entire process of initiating - authorizing - recording - processing - and re






2. The auditor's independent execution of procedures or controls that were originally performed as part of other entity's internal control - either manually or through the use of CAATs.






3. 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






4. The use of normal distribution theory to estimate the dollar amount of misstatement for a class of transactions or an account balance.






5. 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)-i.e. - a clean opinion.






6. 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






7. The relevance of audit evidence refers to its relationship to the assertion or to the objective of the control being tested.






8. The tone of an organization - which reflects the overall attitude - awareness - and actions of the board of directors - management - and owners influencing the control consciousness of its people.






9. An organization created to provide professional accounting-related services - including auditing. Usually formed as a proprietorship or as a form of partnership.






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






11. A control deficiency - or combination of control deficiencies - that adversely effects the entity's ability to initate - authorize - record - process - or report external financial data reliably in accordance with GAAP such that there is more than a






12. Papers that document the evidence gathered by auditors to show the work they have done - the methods and procedures they have followed - and the conclusions they have developed in an audit of financial statements or other type of engagement.






13. A deficiency - or a combination of deficiencies - in internal control that is less severe than a material weakness - yet important enough to merit attention by those charged with governance.






14. Controls that have a pervasive effect on the entity's system of internal control such as controls related to the control environment; controls over management override; the company's risk assessment process; centralized processing and controls - incl






15. Ten broad statements guiding the conduct of financial statement auditing.






16. The auditor's plan for the expected conduct - organization - and staffing of the audit.






17. The amount of the planning materiality that is allocated to a financial statement account.






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






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






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






21. A confirmation request on which the recipient fills in the amount or furnishes the information requested.






22. Tests that concentrate on the details of amounts contained in an account balance and related footnotes.






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






24. Persons elected by the stockholders of a corporation to oversee management and to direct the affairs of the corporation.






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






26. The risk that the auditor will not detect a material misstatement that exists in the financial statements






27. 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






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






29. All the information used by the auditor in arriving at the conclusions on which the audit opinion is based - and includes the information contained in the accounting records underlying the financial statements and other information such as minutes of






30. Controls that apply to the processing of specific computer applications and are part of the computer programs used in the accounting system.






31. 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






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






33. The method by which an entity's board of directors - management - and other personnel provide reasonable assurance about the achievement of objectives in the following categories: (1) reliability of financial reporting - (2) effectiveness and efficie






34. 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.






35. A committee consisting of members of the board of directors - charged with overseeing the entity's system of internal control over financial reporting - internal and external auditors - and financial reporting process. Members typically must be indep






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






37. A deficiency - or combination of deficiencies - that results in a reasonable possibility that a material misstatement of the company's annual or interim financial stsatements will not be prevented or detected on a timely basis






38. The records of initial entries and supporting records - such as checks and records of electronic fund transfers; invoices; contracts; the general and subsidiary ledgers - journal entries - and other adjustments to the financial statements that are no






39. Expressed or implied representations by management about information that is reflected in the financial statements. The three sets of assertions related to ending account balances - transactions - and presentation and disclosure.






40. 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






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






42. 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






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






44. 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.






45. Those policies and procedures that provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition - use - or disposition of the company's assets that could have a material effect on the financial statements






46. A confirmation request to which the recipient responds whether or not he or she agrees with the amount or information stated.






47. A 'clean' audit report - indicating the auditor's opinion that a client's financial statements are fairly presented in accordance with agreed-upon criteria (eg. GAAP)






48. The process of covering a cash shortage by applying cash from one customer's accounts receivable against another customer's accounts receivable.






49. Specific acts performed by the auditor in gathering evidence to determine if specific assertations are being met.






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