Midterm Key Terms
Introduction to Auditing: “An Introduction to Assurance and Financial Statement Auditing”
Assurance services: Independent professional services that improve the quality of information, or its context, for decision makers. Encompasses attest services and financial statement audits.
Attest: A service when a practitioner is engaged to issue or does issue a report on subject matter, or an assertion about subject matter, that is the responsibility of another party. Encompasses financial statement audits.
Audit evidence: All the information used by the auditor in arriving at the conclusions on which the audit opinion is based. Audit evidence includes the information contained in the accounting records underlying the financial statements, as well as other information.
Audit risk: The risk that the auditor expresses an inappropriate audit opinion when the financial statements are materially misstated.
Auditing: A systematic process of (1) objectively obtaining and 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 results to interested users.
Financial statement assertions: Expressed or implied representations by management that are reflected in the financial statement components.
Information asymmetry: The concept that the manager generally has more information about the true financial position and results of operations of the entity than the absentee owner does.
Materiality: The magnitude of 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.
Misstatement: 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),
Assurance services: Independent professional services that improve the quality of information, or its context, for decision makers. Encompasses attest services and financial statement audits.
Attest: A service when a practitioner is engaged to issue or does issue a report on subject matter, or an assertion about subject matter, that is the responsibility of another party. Encompasses financial statement audits.
Audit evidence: All the information used by the auditor in arriving at the conclusions on which the audit opinion is based. Audit evidence includes the information contained in the accounting records underlying the financial statements, as well as other information.
Audit risk: The risk that the auditor expresses an inappropriate audit opinion when the financial statements are materially misstated.
Auditing: A systematic process of (1) objectively obtaining and 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 results to interested users.
Financial statement assertions: Expressed or implied representations by management that are reflected in the financial statement components.
Information asymmetry: The concept that the manager generally has more information about the true financial position and results of operations of the entity than the absentee owner does.
Materiality: The magnitude of 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.
Misstatement: 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),