Audit Midterm2.txt

  1. Assessment of Control Risk 
    A measure of the auditor’s expectation that internal controls will neither prevent material misstatements from occurring nor detect and correct them if they have occurred; control risk is assessed for each transaction related audit objective in a cycle or class of transactions 
  2. Chart of Accounts 
    A listing of all the entity’s accounts which classifies transactions into individual balance sheet and income statement accounts
  3. Compensating Control
    A control elsewhere in the system that offsets the absence of a key control
  4. Collusion
    A cooperative effort among employees to steal assets or misstate records
  5. Control Activities 
    Policies and procedures in addition to those included in the other four components of internal control, that help ensure that necessary actions are taken to address risks in the achievement of the entity’s objectives; they typically include the following five specific control activities (1) adequate separation of duties (2) proper authorization of transactions and activities (3) adequate documents and records (4) physical control over assets and records and (5) independent checks on performance. 
  6. Control Deficiency 
    A deficiency in the design or operation of controls that does not permit company personnel to prevent or detect misstatements on a timely basis
  7. Control Environment
    The actions, policies, and procedures that reflect the overall attitudes of top management, directors, and owners of an entity about internal control and is importance to the entity
  8. Control Risk Matrix
    A methodology used to help the auditor assess control risk by matching key internal controls and internal control deficiencies with transaction related audit objectives 
  9. Entity-level Controls
    Controls that have a pervasive effect on the entity’s system of internal control’ also referred to as “company-level controls”
  10. Flowchart
    A diagrammatic representation of the client’s documents and records and the sequence in which they are processed 
  11. General Authorization
    Companywide policies for the approval of all transaction within stated limits
  12. Independent Checks 
    Internal control activities designed for the continuous internal verification of other controls 
  13. Information and communication
    The set of manual and/or computerized procedures that initiates, records, processes, and reports and entity’s transactions and maintains accountability for the related assets 
  14. Internal Control
    A process designed to provide reasonable assurance regarding the achievement of management’s objectives in the following categories (1) reliability of financial reporting (2) effectiveness and efficiency of operations (3) compliance with applicable laws and regulations 
  15. Internal Control Questionnaire
    A series of questions about the controls in each audit area used as a means of indicating to the auditor aspects of internal control that may be inadequate
  16. Key Controls
    Controls that are expected to have the greatest effect on meeting the audit objectives 
  17. Management Letter
    An optional letter written by the auditor to a client’s management containing the auditor’s recommendation for improving any aspect of the clients business
  18. Material Weakness 
    A significant deficiency in internal control that by itself or in combination with other significant deficiencies results in a reasonable possibility that a material misstatement of the financial statements will not be prevented or detected 
  19. Narrative a written description of clients’ internal controls including origin, processing, and disposition of documents and records, and the relevant control procedures. 
  20. Procedures to obtain an understanding 
    Procedures used by the auditor to gather evidence about the design and implementation of specific controls 
  21. Risk Assessment 
    Management’s identification and analysis of risk relevant to the predation of financial statement in accordance with GAAP
  22. Separation of duties 
    Separation of the following activities in an organization (1) custody of assets from accounting (2) authorization from custody of assets (3) operational responsibility from record keeping and (4) IT duties from outside users of IT
  23. Significant deficiencies 
    One or more control deficiencies exist that is less severe than a material weakens, but important enough to merit attention by those responsible for oversight of the company’s financial reporting 
  24. Significant Risks 
    Risks the auditor believes require special audit consideration; the auditor is required to test the operating effectiveness of controls that mitigate these risks in the curry year audit if control risk is to be assessed below the maximum
  25. Specific Authorization 
    Case-by-Case approval of transactions not covered by companywide policies
  26. Test of Controls
    Audit procedures to test the operating effectiveness of controls in support of reduced assessed control risk 
  27. Those charged with governance
    The person(s) with responsibility for overseeing the strategic direction of the entity and its obligation related to the accountability of the entity, including overseeing the financial reporting and disclosure process
  28. Walkthrough
    The tracing of selected transactions through the accounting system to determine that controls are in place. 
Card Set
Audit Midterm2.txt
audit vocab