Audit and Assurance :

adverse opinion
a report stating that the financial statements are not presented in
conformity with GAAP; the opposite of an unqualified opinion

American Institute of Certification Public Accounting (AICPA)

as related to professional auditing standards, the body charged with
establishing auditing standards for the audits of nonpublic entities
through Statements on Auditing Standards (SASs) issued by the
Auditing Standards Board. Some existing SASs that have not been
amended or superseded by the PCAOB serve as Interim Auditing
Standards for the audits of public entities

appropriate (audit evidence)

characteristics related to the quality (relevance and reliability) of
audit evidence

attestation standards
(Appendix) A general set of standards intended to guide attestation
work in areas other than audits of financial statements

audit procedures
the specialized actions auditors take to obtain evidence in the
engagement

audit plan
a list of the audit procedures auditors need to perform to gather
sufficient appropriate evidence on which to base their opinion on
the financial statements

auditing standards
the audit quality guides that apply to all audits

control risk
the probability that a material misstatement (error or fraud) will not
be prevented or detected on a timely basis by the entity's internal
controls

date of the financial statements

the date of the end of the latest period covered by the financial
statemetns

departure from GAAP

a situation in which the entity's financial statements (or elements
withing those financial statements) are materially misstated and do
not present the entity's financial condition, results of operations, and
cash flows in conformity with GAAP

detection risk
the risk that the audit team's substantive procedures will fail to
detect a material misstatement

disclaimer of opinion
the explicit statement by auditors that they express no opinion and
no assurance on the fair presentation of the financial statements in
accordance with GAAP

due care
a level of performance that would be exercised by reasonable
auditors in similar circumstances; auditors are expected to possess
the skills and knowledge of others in their profession and are not
expected to be infallible
engagement quality control review
an internal evaluation of the significant judgment made by the audit
team and conclusion reached in formulation its report

evidence
the information used by auditors in arriving at the conclusion on
which the audit opinion is based, which includes the underlying
accounting data and all available corroboration information

external evidence
the documentary evidence obtained directly from independent
external sources

external-internal evidence
documentary evidence that has originated outside the client's
information processing system but that has been received and
processed by the client

financial reporting framework

a set of criteria used to determine the measurement, recognition,
presentation, and disclosure of material items in the financial
statements

generally accepted auditing standards (GAAS)

standards that identify necessary qualifications and characteristics
of auditors and guide the conduct of the audit examination

independence (in appearance)

the extent to which others (particularly financial statement users)
perceive auditors to be independent

independence (in fact)

an auditor's mental attitude and impartially with respect to the client

inherent risk
the probability that a material misstatement (error or fraud) will
occur

inspection
an evaluation of an accounting firm's audit engagements and
system of quality control conducted by the PCAOB and required for
any firms providing auditing services to public entities

internal control
the policies and procedures implemented by an entity to prevent or
detect material accounting errors or frauds and provide for their
correction on a timely basis

internal evidence
documentary evidence that is produced, circulated, and maintained
within the client's information systems

materiality
as it relates to financial reporting, the dollar amount that would
influence the lending or investing decisions of financial statement
users

persuasiveness
an overall measure of the ability of evidence to support the auditor's
opinion. Persuasive audit evidence reflects evidence that is both
sufficient and appropriate

peer review
a study of a firm's quality control policies and procedures followed
by a report on the quality of the firm's audit practice in accordance
with its system of quality control. Peer reviews are conducted
through the AICPA's Center for Public Company Audit Firms Peer
Review Program and are generally performed for firms that do not
audit public entities

professional judgement
the application of relevant training, knowledge, and experience in
making informed decisions about appropriate courses of action
during the audit engagement

professional skepticism
a state of mind that is characterized by appropriate questioning and
a critical assessment of audit evidence

Public Company Accounting Oversight Board (PCAOB)

as related to professional auditing standards, the body charged with
establishing auditing standards for the audits of public entities
through the issuance of Auditing Standards. These standards are
subject to the approval of the SEC. Some existing standards issued
by the AICPA that have not been amended or superseded by the
responsible for the inspection of firms that perform audits of public
entities

public entity
an entity that offers registered securities, such as stock and bonds,
for sale to the general public

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qualified opinion
an auditor's report issued when the financial statements contain
departures form GAAP or a scope limitation was encountered in the
audit examination

reasonable assurance
concept that a GAAS audit may not detect all material
misstatements and auditors are not "insurers" or "guarantors"
regarding the fairness of the entity's financial statements

relevant
the characteristic of audit evidence related to the nature of the
evidence and the information it provides to the auditors

reliable
the characteristic of audit evidence related to the level of trust that
can be placed with respect to evidence

risk of material misstatement

the combined probability that a material misstatement (error or
fraud) will occur and not be prevented or detected on a timely basis
by the entity's internal controls

substantive procedures
procedures used by auditor's to obtain assurance as to the fairness
of the entity's financial statement

sufficiency (audit evidence)

the measure of the quantity of audit evidence (the number of
transactions or components evaluated)
system of quality control
the policies and procedures implemented by firms to provide a firm
with reasonable assurance that the firm and its personnel (1)
comply with professional standards and applicable regulatory and
legal requirements and (2) issue reports that are appropriate in the
circumstances

unqualified opinion
a "clean" opinion that makes no mention of accounting or auditing
deficiencies. The conclusion of an unqualified opinion is that the
financial statements present the financial condition, results of
operations, and cash flows in accordance with GAAP

verbal evidence
responses to audit inquiries provided by the client's officers,
directors, owners, and employees

written representations
written assertions provided by management to auditors on matters
such as the fairness of the entity's financial statements, availability
of all financial records and related data, internal control over
financial reporting, and other specific representations about the
financial statements