Term
|
Definition
| The measure of how willing the auditor is to accept that the financial statements may be materially mistated after the audit is completed and an unqualified opinion has been issued. |
|
|
Term
|
Definition
| The measure of the auditor's assesment of the liklihood that there are material mistakes in an account balance before considering the effectiveness of internal control |
|
|
Term
| Intial Audit Planning (4 steps) |
|
Definition
1.) The auditor decides whether to accept a new client or to continue serving an existing one. The determination is typically made by an experienced auditor who is in a position to make important decisions. The auditor wants to make this decision early, before incurring any significant costs that can't be recovered.
2.)The auditor identifies why the client wants or needs an audit. This information is likely to affect the remaining parts of the planning process.
3.)To avoid misunderstanding, the auditor obtains an understanding with the client about the terms of the engagement
4.) The auditor develops an overall strategy for the audit, including engagment staffing and any required audi specialists. |
|
|
Term
| What does AU 311 require? |
|
Definition
| The auditor to document their understanding with the client (Engagement letter) |
|
|
Term
|
Definition
| The Strategy considers the nature of the client's business and industry, including areas where the greater risk of significant misstatement. The auditor also considers other factors such as the number of client locations and the effectiveness of client controls in developing a preliminary approach to the audit. Helps determine the resources that the auditor requires. |
|
|
Term
|
Definition
| Requires an auditor considering a new client to communicate with the predecessor auditor. The Code of Professional Conduct requires permission from the client before contact takes place. |
|
|
Term
| What does AU 336 deal with? |
|
Definition
| Requirements for selecting outside specialists and reviewing their work |
|
|
Term
|
Definition
| An affliated company, a principal owner of the client company, or any other party with which the client deals, where one of parties can influence the management or operating policies of the other. |
|
|
Term
| Related Party Transaction |
|
Definition
| Any transaction between the client and related party. Common examples include sales and purchase transactions between parent company and its subsidiary. |
|
|
Term
|
Definition
| Risk that the client wil fail to acheive its objectives. Client business risk can arise from any of the factors affecting the client and its enviroment. |
|
|
