ACCT 4335- Ch. 5

journal entries designed to correct misstatements found in a client's records

working papers specifically designed to help the auditors in the planning and administration of the engagement, such as audit programs, internal control questionnaires and flowcharts, time budgets, and engagement memoranda

a measure of the quality of the evidence obtained

any information that corroborates or refutes the auditors' premise that the financial statements present fairly the client's financial position and operating results

the unit of storage for a specific audit engagement. the audit documentation for each year's audit of a company is included in its audit file

the risk that the auditors may unknowingly fail to appropriately modify their opinion on financial statements that are materially misstated

financial statements that present each amount as a percentage of some financial statement base

the risk that a material misstatement that could occur in an account will not be prevented or detected on a timely basis by internal control

-documents and memoranda included in the working papers that substantiate representations contained in the client's financial statements
-include audit confirmations, lawyers' letters, copies of contracts, copies of minutes of directors' and stockholders' meetings, and representation letters from the client's management

journal entries designed to correct misstatements found in a client's records

working papers specifically designed to help the auditors in the planning and administration of the engagement, such as audit programs, internal control questionnaires and flowcharts, time budgets, and engagement memoranda

a measure of the quality of the evidence obtained

any information that corroborates or refutes the auditors' premise that the financial statements present fairly the client's financial position and operating results

the unit of storage for a specific audit engagement. the audit documentation for each year's audit of a company is included in its audit file

the risk that the auditors may unknowingly fail to appropriately modify their opinion on financial statements that are materially misstated

financial statements that present each amount as a percentage of some financial statement base

the risk that a material misstatement that could occur in an account will not be prevented or detected on a timely basis by internal control

-documents and memoranda included in the working papers that substantiate representations contained in the client's financial statements
-include audit confirmations, lawyers' letters, copies of contracts, copies of minutes of directors' and stockholders' meetings, and representation letters from the client's management

a technique that involves comparing the client's ratios for the current year with those of similar firms in the same industry

the process of determining that transactions occurring near the balance sheet date are assigned to the proper accounting period

when the auditor has obtained sufficient appropriate audit evidence to support the opinion on the financial statements or other financial information being reported upon

audit report is ordinarily date as of this date

the risk that the auditors' procedures will lead them to conclude that a financial statement assertion is not materially misstated when in fact such misstatement does exist

second partner review

second partner review

involves the review of changes in an account balance over time

involves comparisons of account balances to financial data

involves the use of statistical models to quantify the auditors' expectation about a financial statement amount or ratio

similar to regression analysis in that an explicit expectation is compute for the financial statement amount using financial or non financial data

3 types of transactions assessed for inherent risk

3 components of audit risk

audit risk formula

risk of material misstatement formula

two types of substantive procedures

3 types of tests of details

3 approaches to auditing fair values and other estimates

the date on which documentation should be completed (within 60 days of the delivery date)

a system in which data are exchanged electronically between the computers of different companies. source documents are replaced with electronic transactions created in a standard format

a transaction involving management's judgments or assumptions, such as determining the allowance for doubtful accounts, establishing warranty reserves, and assessing assets for impairment

for purposes of audit documentation, an individual who has practical audit experience and a reasonable understanding of
1. audit processes
2. Statements on Auditing Standards and applicable legal and regulatory requirements
3. the entity's business environment
4. auditing and financial reporting issues relevant to the entity's industry

the additional procedures that are performed based on the results of the auditors' risk assessment procedures, including additional tests of controls (if needed) and substantive tests of account balances, classes of transactions, and disclosures

a technique that involves comparing financial statement amounts and ratios for a particular company from year to year

the risk of material misstatement of a financial statement assertion, assuming there were no related controls

a working paper with columnar headings similar to those in a working trial balance, set up to combine similar ledger accounts, the total of which appears in the working trial balance as a single amount

-of substantial importance
-substantial enough to affect evaluations or decisions by users of financial statements
-involves both qualitative and quantitative considerations

a formal record of the issues discussed and actions taken in meetings of stockholders or the board of directors

a transaction that occurs only periodically, such as countering and pricing inventory, calculating depreciation expense, or determining prepaid expenses

a file of working papers containing relatively unchanging data, such as copies of articles of incorporation and bylaws; copies of minutes of directors', stockholders', and committee meetings; and analyses os much ledger accounts as land and retained earnings

evidence derived by the auditors from physical examination

-a working paper entry drafted by the auditors to assure fair presentation of the client's financial statements
-do not correct misstatements in the client company's accounting records, so they aren't posted to the client's ledger accounts

a transaction in which one party has the ability to influence significantly the management or operating policies of the other party, to the extent that one of the transacting parties might be prevented from pursuing fully its own separate interests

a financial statement assertion that has a reasonable possibility of containing a misstatement or misstatements that would cause the financial statements to be materially misstated

the date the auditor grants the client permission to use the auditor's report, which is ordinarily close to the audit report date

a single letter or separate letters prepared by officers of the client company at the auditors' request setting forth certain representations about the com pan's financial position or operations

-performed by the auditor to obtain an understanding of the nitty and its environment, including its internal control
-ordinarily include inquiries of management and others within the entity, analytical procedures, and observation and inspection
-often provide a limited about the operating effectiveness of the client's internal control

a transaction for a recurring financial activity recorded in the accounting records in the normal course of business

a person or fim possessing special skill or knowledge in a field other than accounting or auditing, such as an actuary

performed by the auditor to detract material misstatements in account balances, classes of transactions, and disclosures

a measure of the quantity of the audit evidence required

procedures performed by the auditor to test the operating effectiveness of controls in preventing or detecting material misstatement at the relevant assertion level

-a symbol used in working papers by the auditor to indicate a specific step in the work performed
-must be accompanied by a legend whenever used

-a form of analysis that presents financial statement amounts for a period as a percentage of some financial statement base
-involves preparation of common-size financial statements

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

a working paper that lists the balances of accounts in the general ledger for the current and the previous year and also provides columns for the auditors' adjustments and reclassifications and for the final amounts that will appear in the financial statements