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






2. 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.






3. 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






4. Seeking information of knowledgeable persons - both financial and nonfinancial - throughout the entity or outside the entity.






5. 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.






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






7. The auditor's decision not to rely on the entity's controls and to audit the related financial statement account by relying more on substantive procedures.






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






9. A process that assess the quality of internal control performance over time.






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






11. The diagnosticity of evidence; that is whether the type of evidence can be relied on to signal the true state of the assertion.






12. 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.






13. Processes implemented by management to achieve entity objectives. Business processes are typically organized into the following categories: revenue - purchasing. human resource management - inventory management - and financing processes






14. Risks resulting from significant conditions - events - circumstances - and actions or inactions that could adversely affect management's ability to execute its strategies and to achieve its objectives - or through the setting of inappropriate objecti






15. Consulting services that may provide advice and assistance concerning an entity's organization - personnel - finances - operations - systems - or other activities






16. 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.






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






18. A deficiency - or combination of deficiencies - in internal control - such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented - or detected and corrected - on a timely basis.






19. A risk of material misstatement that is important enough to require special audit consideration.






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






21. Business transactions between individuals and organizations that occur without proper documents - using computers - and telecommunication networks.






22. A state of objectivity in fact and in appearance - including the absence of any significant conflicts of interest.






23. 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.






24. Basic unit containing the elements of the population to be sampled






25. 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.






26. 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 -






27. An attitude that includes a questioning mind and a critical assessment of an audit evidence. The auditor should not assume that management is either honest or dishonest.






28. A review of audit documentation by an additional person (normally - a partner or equivalent with the firm) who has not been involved with the audit; its purpose is to ensure that quality of the audit work and reporting is consistent with the quality






29. 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






30. The application of an audit procedure to less than 100 percent of the items within an account or class of transactions for the purpose of evaluating some characteristic of the balance or class.






31. Specific acts performed as the auditor gathers evidence to determine if specific audit objectives are being met.






32. The susceptibility of an assertion to material misstatement - assuming no related controls






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. 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.






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






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






37. The oversight mechanisms in place to help ensure the proper stewardship over an entity's assets. Management and the board of directors play primary roles - and the independent auditor plays a key facilitating role.






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






39. A violation of laws or governmental regulations.






40. A measure of sampling risk added and subtracted to the projected misstatement to form a confidence interval.






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






42. 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






43. A deficiency - or combination of deficiencies - in internal control - such that there is a reasonable possibility that a material misstatememnt of the entity's financial statements will not be prevent - or detected and corrected on a timely basis.






44. 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.






45. 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






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






47. Test to detect errors or fraud in individual transactions.






48. 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






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






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