Audit Chapter 1 - Intro

An engagement performed by an auditor or consultant to enhance the reliability of the subject matter.

The financial framework chosen by management to prepare a company’s financial statements.

Statements made by management regarding the recognition, measurement, and presentation and disclosure of items in the financial statements.

Information used by the auditor to support the audit opinion.

The file where the evidence and documentation of the work performed are kept as a permanent record to support the opinion issued.

The list or description of audit procedures to be performed.

The risk that the auditor may express an inappropriate opinion. This means that the auditor may indicate that the financial statements are not materially misstated when in fact they are.

A structured representation of historical financial information, including the required disclosures.

The auditor’s formal expression of opinion on whether the financial statements are in accordance with the applicable financial reporting framework.

The processes implemented and maintained by management to help the entity achieve its objectives.

An amount or disclosure that is significant enough to make a difference to a user.

The quantity (sufficiency) and quality (appropriateness) of the evidence collected by the auditor.

The auditor’s opinion concluding that the financial statements are fairly represented.

Paper or electronic documentation of the audit created by the audit team as evidence of the work completed.

Risk that users will rely on incorrect information to make a decision.

Due to the remoteness of the owners from the entity, the complexity of items included in the financial statements, and competing incentives between owners and managers, the owners (principals) have an incentive to hire an auditor to assess the fair presentation of the information contained in the financial statements prepared by their managers.

Due to the demand for reliable, high-quality information, various user groups, including shareholders, banks, and other lenders, will demand that financial statements be audited to aid their decision-making.

Investors will demand that financial statements be audited as a way of insuring against some of their loss should their investment fail.

An audit that provides reasonable assurance about whether the financial statements are prepared in all material respects in accordance with the financial reporting framework.

An entity whose shares or debt are listed on a stock exchange.

The consistent and faithful application of accounting standards when preparing the financial statements.

An audit to determine whether the entity has conformed with regulations, rules, or processes.

An assessment of the economy, efficiency, and effectiveness of an organization’s operations.

An audit that encompasses a range of audit and audit-related activities, such as a financial statement audit, performance audit, and compliance audit.

An independent service within an entity that generally evaluates and improves risk management, internal control procedures, and elements of the governance process.

Generally the board of directors, and may include management of an entity, concerned with evaluating and improving risk management, internal control procedures, and elements of the governance process.

A range of activities undertaken voluntarily by a corporation. Disclosures include environmental, employee, and social reporting.

Non-audit firms that provide assurance services on non-financial information, such as corporate social responsibility and environmental disclosures.

Assurance that provides high but not absolute assurance on the reliability of the subject matter.

The level of assurance obtained where engagement risk is reduced to an acceptable level and the evidence gathered is at least sufficient for the practitioner to conclude and provide a level of assurance that is likely to enhance the intended users’ confidence about the financial statements.

Engagement in which the practitioner does adequate work to provide limited assurance.

What results when a practitioner completes a set of tasks requested by the client and reported factually on the results of that work to the client.

Engagement that provides no assurance, where the practitioner compiles the financial information in accordance with the basis of accounting disclosed in the financial statements.

The communication issued when the practitioner performs a compilation engagement.

A clean audit opinion. The auditor concludes that the financial statements are fairly presented.

What results when an auditor issues a unmodified audit opinion where there is a significant issue that is adequately disclosed and here is a need to draw the attention to the suer to it in the audit report.

Opinion provided when the auditor concludes that there is a pervasive material misstatement in the financial statements.

Opinion provided when the impact of a scope limitation is so extreme that an auditor is unable to obtain sufficient appropriate evidence to base an opinion.

Purpose is to serve public interest by setting high-quality auditing and assurance standards.

Objective of improving, coordinating, and harmonizing regulation of Canadian capital markets. Regulates disclosure requirements for publicly listed entities. Requires public companies to issue annual audited financial statements in accordance with GAAP.

The CSA requires auditors of reporting issuers to be a registered member and to be in good standing with this organization. It is a national body responsible for the regulation of public accounting firms. They also inspect auditors of reporting issuers (1-3 years).