Auditing

- The accumulation and evaluation of evidence about information to determine and

report on the degree of correspondence between the information and established
criteria.

(should be done by a competent, independent person)

Evidence
- Any information used by the auditor to determine whether the information being
audited is stated in accordance with the established criteria.
Independent Auditors
- certified public accountants or accounting firms that perform audits of commercial and
non-commercial entities.
Audit Report
- Communicates the auditor's findings to users; must inform readers of the degree of
correspondence between the information audited and established criteria.
Accounting
- The recording, classifying, and summarizing of economic events in a logical manner
for the purpose of providing financial information for decision making.
Information Risk
- The risk that information upon which a business decision is made is inaccurate.
Assurance Service
- An independent professional service that improves the quality of information for
decision makers.
Sarbanes-Oxley Act
- A federal securities law passed in 2002 that provides for additional regulation of public
companies and their auditors; the Act established the Public Company Accounting
Oversight Board (PCAOB) and also requires auditors of larger public companies to audit
the effectiveness of internal control over financial reporting.
Attestation Service
- A type of assurance service in which the CPA firm issues a report about a subject
matter or assertion that is the responsibility of another party.
Audit of Historical Financial Statements
- A form of attestation service in which the auditor issues a written report stating
whether the financial statements are in material conformity with accounting standards.
Internal Control Over Financial Reporting
- An engagement in which the auditor reports on the effectiveness of internal control
over financial reporting; such reports are required for accelerated filer public companies
under Section 404 of the Sarbanes-Oxley Act.
Review of Historical Financial Statements
- A form of attestation in which a CPA firm issues a written report that provides less
assurance than an audit as to whether the financial statements are in material
conformity with accounting standards.
Operational Audit
- A review of any part of an organization's operating procedures and methods for the
purpose of evaluating efficiency and effectiveness.
Compliance Audit
1. A review of an organization's financial records performed to determine whether the
organization is following specific procedures, rules, or regulations set by some higher
authority.

2. An audit performed to determine whether an entity that receives financial assistance

from the federal government has complied with specific laws and regulations.
Financial Statement Audit
- An audit conducted to determine whether the overall financial statements of an entity
are stated in accordance with specified criteria (usually U.S. or international accounting
standards).
Government Accountability Office Auditor
- An auditor working for the U.S. Government Accountability Office (GAO); the GAO
reports to and is responsible solely to Congress.
Internal Revenue Agents
- Auditors who work for the Internal Revenue Service (IRS) and conduct examinations
of taxpayers' returns.
Internal Auditors
- Auditors employed by a company to audit for the company's board of directors and
management.
Certified Public Accountant
- A person who has met state regulatory requirements, including passing the Uniform
CPA Examination, and has thus been certified; a CPA may have as his or her primary
responsibility the performance of the audit function on historical financial statements of
commerical and noncommercial financial entities.
Public Company Accounting Oversight Board (PCAOB)
- Board created by the Sarbanes-Oxley Act; oversees auditors of public companies and
broker-dealers, including establishing auditing, attestation, and quality control standards
and performing inspections of registered accounting firms.
Securities and Exchange Commission (SEC)
- A federal agency that oversees the orderly conduct of the securities markets; the SEC
assists in providing investors in public corporations with reliable information upon which
to make investment decisions.
American Institute of Certified Public Accountants (AICPA)
- A voluntary organization of CPAs that sets professional requirements, conducts
research and publishes materials relevant to accounting, auditing, advisory services,
and taxes.
Statements on Auditing Standards (SASs)
- Pronouncements issued by the Auditing Standards Board of the AICPA applicable to
audits of entities other than public issuers.
International Standards on Auditing (ISAs)
- Statements issued by the International Auditing and Assurance Standards Board of
the International Federation of Accountants to promote international acceptance of
auditing standards.
Principles Underlying an Audit
- Framework helpful in understanding and explaining an audit; provide a structure for
the Codification of Statements on Auditing Standards.
Quality Control
- Methods used by a CPA firm to ensure that the firm meets its professional
responsibilities to clients and others.
Peer Review
- The review by CPAs of a CPA firm's compliance with its quality control system.
Center For Audit Quality
- A public policy organization with a mission to foster confidence in the audit process
and to make public company audits even more reliable and relevant for investors.
Standard Unmodified Opinion Audit Report
- The report a CPA issues when all auditing conditions have been met, no significant
misstatements have been discovered and left uncorrected, and it is the auditor's opinion
that the financial reporting framework.
Material Misstatement
- A misstatement in the financial statements, knowledge of which would affect a
decision of a reasonable user of the statements.
Separate report on Internal Control Over Financial Reporting
- Audit report on the effectiveness of internal control over financial reporting required for
larger public companies under Section 404 of the Sarbanes-Oxley Act that cross-
references the separate audit report on the financial statements.