The flashcards below were created by user Seifer on FreezingBlue Flashcards.

  1. adverse opinion (on internal control over financial reporting)
    Opinion issued when the company has not maintained an effective internal control over financial reporting
  2. Audit committee
    a subcommittee of the board of directors that is generally composed of three to six "outside" members of the organization's board of directors
  3. Auditor's report on internal control over financial reporting
    a report required by the Sarbanes-Oxley Act that provides an opinion on the effectiveness of the entity's internal control over financial reporting
  4. business risk
    those factors, events, and conditions that could prevent the organization from achieving its business objectives
  5. control activities
    specific actions taken by a client's management and employees to help ensure that management directives are carried out
  6. control risk
    the probability that an entity's controls will fail to prevent or detect erros and frauds that would otherwise have entered the system
  7. design effectiveness
    a condition expressing whether controls would be expected to prevent or detect errors or fraud that could result in a material misstatement in the financial statements
  8. detective controls
    activities that detect misstatement after they occur
  9. disclaimer of opinion (internal control over financial reporting)
    situations in which auditors cannot provide assurance on the effectiveness of internal control over financial reporting; issued when a significant cope limitation exists
  10. dual purpose tests
    an audit procedure that can be used as both a test of controls and a substantive test
  11. entity-level controls (ELCs)
    controls that are pervasive to the financial statements taken as a whole
  12. information technology application controls (ITAC)
    computerized steps with the application software and related manual procedures to control the processessing of various types of transactions. Major categories of ITAC are input controls, processing controls, and output controls
  13. Information technology general controls (ITGC)
    Controls that apply to all application systems and help ensure their continued proper operations. Major categories of ITGC are hardware controls, program development controls, program change controls, computer operations controls, and access to programs and data controls
  14. Input controls
    controls designed to provide reasonable assurance that data received for processing by the information-processing department have been authorized properly and converted into machine-sensitive form and that information has not been lost, suppressed, added, duplicated, or improperly changed
  15. internal control
    a process, effected by an entity's board of directors, management, and other personnel, designed to provide reasonable assurance regarding the achievement of objectives in the reliability of financial reporting, the effectiveness and efficiency of operations, and compliance with applicable laws and regulations
  16. internal control deficiency
    a condition that exists when the design or operation of a control does not allow the entity's management or employees to detect or prevent misstatements in a timely fashion
  17. internal control questionnaire
    a checklist of internal control-related questions used to gain and document an understandin of the client's internal control
  18. Management's annual report on internal control over financial reporting
    a report required by the Sarbane-Oxley Act that states that management is responsible for establishing and maintaining adequate internal control over financial reporting, identifies the framework management uses to evaluate the effectiveness of the entity's internal control, and provides management's assessment of the effectiveness of the entity's internal control
  19. material weakness
    a deficiency, or combination of deficiencies, that results in a reasonable possibility that a material misstatement would not be prevented or detected in a timely basis
  20. narrative description
    audit documentation that describes the environmental elements, the accounting system, and the control activities in an entity's internal control
  21. operating effectiveness
    a condition expressing whether a control is operating as designed and whether the person performing the control possess the necessary authority and qualifications to perform the control effectively
  22. output controls
    the final check on the accuracy of the results of computerized processing and controls designed to ensure that only proper persons receive reports or have access to files produced by the system
  23. preventative controls
    activities that prevent misstatement before they occur
  24. processing controls
    error-condition check routines written into the computer program
  25. reasonable assurance
    concept that recognizes that the costs of control activities should not exceed the benefits that are expected from the control activities
  26. significant deficiency
    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
  27. substantive procedures
    detail audit and analytical procedures designed to detect material misstatements in account balances and footnote disclosures
  28. transaction-level controls
    controls that relate to specific classes of transactions, account balances, and disclosures
  29. unqualified opinion (on internal control over financial reporting)
    issued when no material weaknesses in internal control over financial reporting are identified and no scope limitations on the audit of internal control exist
  30. walkthrough
    tracing one ore more transactions through the audit trail from initiation of the transaction to its inclusion in the financial statements
Card Set
Auditing Chapter 5 terms
Show Answers