DE LA SALLE UNIVERSITY MANILA

RVR COB DEPARTMENT OF ACCOUNTANCY

REVDEVT 3
rd
Term AY 13-14
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GLOSSARY OF TERMS
(Effective for audits of financial statements
for periods beginning on or after December 15, 2009)
ACCESS CONTROLSProcedures designed to restrict access to on-line terminal devices, programs
and data. Access controls consist of user authentication and user authorization. User authentication
typically attempts to identify a user through unique logon identifications, passords, access cards or
!iometric data. User authorization consists of access rules to determine the computer resources each
user may access. "pecifically, such procedures are designed to prevent or detect#
$a% Unauthorized access to on-line terminal devices, programs and data&
$!% 'ntry of unauthorized transactions&
$c% Unauthorized changes to data files&
$d% (he use of computer programs !y unauthorized personnel& and
$e% (he use of computer programs that have not !een authorized.
ACCOUNTING ESTIMATEAn accounting estimate is an appro)imation of the amount of an item in the
a!sence of a precise means of measurement.
ACCOUNTING SYSTEMAn accounting system is the series of tas*s and records of an entity !y hich
transactions are processed as a means of maintaining financial records. "uch systems identify,
assem!le, analyze, calculate, classify, record, summarize and report transactions and other events.
ADVERSE OPINION$see +odified auditor,s report%
AGREED-UPON PROCEDURES ENGAGEMENT-n an engagement to perform agreed-upon
procedures, an auditor is engaged to carry out those procedures of an audit nature to hich the auditor
and the entity and any appropriate third parties have agreed and to report on factual findings. (he
recipients of the report must form their on conclusions from the report !y the auditor. (he report is
restricted to those parties that have agreed to the procedures to !e performed since others, unaare of
the reasons for the procedures may misinterpret the results.
ANALYTICAL PROCEDURESAnalytical procedures consist of the analysis of significant ratios and
trends including the resulting investigation of fluctuations and relationships that are inconsistent ith other
relevant information or deviate from predicta!le amounts.
ANNUAL REPORTAn entity ordinarily issues on an annual !asis a document hich includes its
financial statements together ith the audit report thereon. (his document is frequently referred to as the
annual report.
ANOMALOUS ERROR$see Audit sampling%
APPLICATION CONTROLS IN COMPUTER INFORMATION SYSTEMS(he specific controls over the
relevant accounting applications maintained !y the computer. (he purpose of application controls is to
esta!lish specific control procedures over the accounting applications in order to provide reasona!le
assurance that all transactions are authorized and recorded, and are processed completely, accurately
and on a timely !asis.
APPROPRIATENESSAppropriateness is the measure of the quality of audit evidence and its relevance
to a particular assertion and its relia!ility.
ASSERTIONSAssertions are representations !y management, e)plicit or otherise, that are em!odied
in the financial statements. $see .inancial statements assertions%
ASSISTANTSAssistants are personnel involved in an individual audit other than the auditor.
Gl!!"r# $ Term!
ASSURANCE$see /easona!le assurance%
ATTENDANCEAttendance consists of !eing present during all or part of a process !eing performed !y
others& for e)ample, attending physical inventory ta*ing ill ena!le the auditor to inspect inventory, to
o!serve compliance of management,s procedures to count quantities and record such counts and to test-
count quantities.
AUDIT(he o!0ective of an audit of financial statements is to ena!le the auditor to e)press an opinion
hether the financial statements are prepared, in all material respects, in accordance ith an identified
financial reporting frameor*. (he phrase used to e)press the auditor,s opinion is present fairly, in all
material respects. A similar o!0ective applies to the audit of financial or other information prepared in
accordance ith appropriate criteria.
AUDIT EVIDENCEAudit evidence is the information o!tained !y the auditor in arriving at the
conclusions on hich the audit opinion is !ased. Audit evidence ill comprise source documents and
accounting records underlying the financial statements and corro!orating information from other sources.
AUDIT FIRMAudit firm is either a firm or entity providing audit services, including here appropriate its
partners, or a sole practitioner.
AUDIT OPINION$see 1pinion%
AUDIT PROGRAMAn audit program sets out the nature, timing and e)tent of planned audit procedures
required to implement the overall audit plan. (he audit program serves as a set of instructions to
assistants involved in the audit and as a means to control the proper e)ecution of the or*.
AUDIT RISKAudit ris* is the ris* that the auditor gives an inappropriate audit opinion hen the financial
statements are materially misstated. Audit ris* has three components# inherent ris*, control ris* and
detection ris*.
CONTROL RISK2ontrol ris* is the ris* that a misstatement that could occur in an account !alance or
class of transactions and that could !e material, individually or hen aggregated ith misstatements in
other !alances or classes, ill not !e prevented or detected and corrected on a timely !asis !y the
accounting and internal control systems.
DETECTION RISK3etection ris* is the ris* that an auditor,s su!stantive procedures ill not detect a
misstatement that e)ists in an account !alance or class of transactions that could !e material, individually
or hen aggregated ith misstatements in other !alances or classes.
INHERENT RISK-nherent ris* is the suscepti!ility of an account !alance or class of transactions to
misstatement that could !e material, individually or hen aggregated ith misstatements in other
!alances of classes, assuming that there ere no related internal controls.
AUDIT SAMPLINGAudit sampling $sampling% involves the application of audit procedures to less than
4556 of items ithin an account !alance or class of transactions such that all sampling units have a
chance of selection. (his ill ena!le the auditor to o!tain and evaluate audit evidence a!out some
characteristic of the items selected in order to form or assist in forming a conclusion concerning the
population from hich the sample is dran. Audit sampling can use either a statistical or a non-statistical
approach.
Anomalous errorAnomalous error means an error that arises from an isolated event that has
not recurred other than on specifically identifia!le occasions and is therefore not representative of
errors in the population.
E!e"#e$ error(he error that the auditor e)pects to !e present in the population.
Non-sam!l%n& r%s'7on-sampling ris* arises from factors that cause the auditor to reach an
erroneous conclusion for any reason not related to the size of the sample. .or e)ample, most
audit evidence is persuasive rather than conclusive, the auditor might use inappropriate
procedures, or the auditor might misinterpret evidence and fail to recognize an error.
Po!ula#%onPopulation means the entire set of data from hich a sample is selected and a!out
hich the auditor ishes to dra conclusions. A population may !e divided into strata, or su!-
populations, ith each stratum !eing e)amined separately. (he term population is used to include
the term stratum.
Sam!l%n& r%s'"ampling ris* arises from the possi!ility that the auditor,s conclusion, !ased on
a sample may !e different from the conclusion reached if the entire population ere su!0ected to
the same audit procedure.
2
Gl!!"r# $ Term!
Sam!l%n& un%#"ampling unit means the individual items constituting a population, for e)ample
chec*s listed on deposit slips, credit entries on !an* statements, sales invoices or de!tors,
!alances, or a monetary unit.
S#a#%s#%"al sam!l%n&"tatistical sampling means any approach to sampling that has the
folloing characteristics#
$a% /andom selection of a sample& and
$!% Use of pro!a!ility theory to evaluate sample results, including measurement of sampling ris*.
A sampling approach that does not have characteristics $a% and $!% is considered non statistical
sampling.
S#ra#%(%"a#%on"tratification is the process of dividing a population into su!populations, each of
hich is a group of sampling units hich have similar characteristics $often monetary value%.
Tolera)le error(olera!le error means the ma)imum error in a population that the auditor is
illing to accept.
AUDITOR(he auditor is the person ith final responsi!ility for the audit. (his term is also used to refer
to an audit firm. $.or ease of reference, the term auditor is used throughout the P"As hen descri!ing
!oth auditing and related services hich may !e performed. "uch reference is not intended to imply that a
person performing related services need necessarily !e the auditor of the entity,s financial statements.%
AU3-(-78
Con#%nu%n& au$%#or(he continuing auditor is the auditor ho audited and reported on the prior
period,s financial statements and continues as the auditor for the current period.
E#ernal au$%#or9here appropriate the terms e)ternal auditor and e)ternal
audit are used to distinguish the e)ternal auditor from an internal auditor and to
distinguish the e)ternal audit from the activities of internal auditing.
In"om%n& au$%#or(he incoming auditor is a current period,s auditor ho did not audit the prior
period,s financial statements.
O#*er au$%#or(he other auditor is an auditor, other than the principal auditor, ith responsi!ility
for reporting on the financial information of a component hich is included in the financial
statements audited !y the principal auditor. 1ther auditors include affiliated firms, hether using
the same name or not, and correspondents, as ell as unrelated auditors.
PersonnelPersonnel includes all partners and professional staff engaged in the audit practice
of the firm.
Pre$e"essor au$%#or(he auditor ho as previously the auditor of an entity and ho has
!een replaced !y an incoming auditor.
Pr%n"%!al au$%#or(he principal auditor is the auditor ith responsi!ility for reporting on the
financial statements of an entity hen those financial statements include financial information of
one or more components audited !y another auditor.
AUDITOR+S ASSOCIATIONAn auditor is associated ith financial information hen the auditor
attaches a report to that information or consents to the use of the auditor,s name in a professional
connection.
COMPARATIVES2omparatives in financial statements, may present amounts $such as financial
position, results of operations, cash flos% and appropriate disclosures of an entity for more than one
period, depending on the frameor*. (he frameor*s and methods of presentation are as follos#
$a% 2orresponding figures here amounts and other disclosures for the preceding period are
included as part of the current period financial statements, and are intended to !e read in relation
to the amounts and other disclosures relating to the current period $referred to as current period
figures%. (hese corresponding figures are not presented as complete financial statements
capa!le of standing alone, !ut are an integral part of the current period financial statements
intended to !e read only in relationship to the current
period figures& and
$!% 2omparative financial statements here amounts and other disclosures for the preceding
period are included for comparison ith the financial statements of the current period, !ut do not
form part of the current period financial statements.
3
Gl!!"r# $ Term!
COMPILATION ENGAGEMENT-n a compilation engagement, the accountant is engaged to use
accounting e)pertise as opposed to auditing e)pertise to collect, classify and summarize financial
information.
COMPONENT2omponent is a division, !ranch, su!sidiary, 0oint venture, associated company or other
entity hose financial information is included in financial statements audited !y the principal auditor.
COMPREHENSIVE ,ASIS OF ACCOUNTINGA comprehensive !asis of accounting comprises a set of
criteria used in preparing financial statements hich applies to all material items and hich has
su!stantial support.
COMPUTATION2omputation consists of chec*ing the arithmetical accuracy of source documents and
accounting records or of performing independent calculations.
COMPUTER-ASSISTED AUDIT TECHNI-UESApplications of auditing procedures using the computer
as an audit tool are *non as 2omputer Assisted Audit (echniques $2AA(s%.
COMPUTER INFORMATION SYSTEMSA computer information systems $2-"% environment e)ists
hen a computer of any type or size is involved in the processing !y the entity of financial information of
significance to the audit, hether that computer is operated !y the entity or !y a third party.
CONFIRMATION$see ')ternal confirmation%
CONTINUING AUDITOR$see Auditor%
CONTROL ENVIRONMENT(he control environment comprises the overall attitude, aareness and
actions of directors and management regarding the internal control system and its importance in the
entity.
CONTROL PROCEDURES2ontrol procedures are those policies and procedures in addition to the
control environment hich management has esta!lished to achieve the entity,s specific o!0ectives.
CONTROL RISK$see Audit ris*%
CORPORATE GOVERNANCE$see 8overnance%
DATA,ASEA collection of data that is shared and used !y a num!er of different users for different
purposes.
DETECTION RISK$see Audit ris*%
DISCLAIMER OF OPINION$see +odified auditor,s report%
DOCUMENTATION3ocumentation is the material $or*ing papers% prepared !y and for, or o!tained
and retained !y the auditor in connection ith the performance of the audit.
ELECTRONIC DATA INTERCHANGE .EDI/(he electronic transmission of documents !eteen
organizations in a machine-reada!le form.
EMPHASIS OF MATTER PARAGRAPH.S/$see +odified auditor,s report%
ENCRYPTION .CRYPTOGRAPHY/(he process of transforming programs and information into a form
that cannot !e understood ithout access to specific decoding algorithms $cryptographic *eys%. .or
e)ample, the confidential personal data in a payroll system may !e encrypted against unauthorized
disclosure or modification. 'ncryption can provide an effective control for protecting confidential or
sensitive programs and information from unauthorized access or modification. :oever, effective security
depends upon proper controls over access to the cryptographic *eys.
ENGAGEMENT LETTERAn engagement letter documents and confirms the auditor,s acceptance of
the appointment, the o!0ective and scope of the audit, the e)tent of the auditor,s responsi!ilities to the
client and the form of any reports.
AU3-(-78
ENVIRONMENTAL MATTERS'nvironmental matters are defined as#
a. -nitiatives to prevent, a!ate, or remedy damage to the environment, or to deal ith conservation
of renea!le and non-renea!le resources $such initiatives may !e required !y environmental
las and regulations or !y contract, or they may !e underta*en voluntarily%&
!. 2onsequences of violating environmental las and regulations&
c. 2onsequences of environmental damage done to others or to natural resources&
d. 2onsequences of vicarious lia!ility imposed !y la $for e)ample, lia!ility for damages caused !y
previous oners%.
4
Gl!!"r# $ Term!
ENVIRONMENTAL PERFORMANCE REPORTAn environmental performance report is a report,
separate from the financial statements, in hich an entity provides third parties ith qualitative information
on the entity,s commitments toards the environmental aspects of the !usiness, its policies and targets in
that field, its achievement in managing the relationship !eteen its !usiness processes and
environmental ris*, and quantitative information on its environmental performance.
ENVIRONMENTAL RISK-n certain circumstances, factors relevant to the assessment of inherent ris*
for the development of the overall audit plan may include the ris* of material misstatement of the financial
statements due to environmental matters.
ERRORAn error is an unintentional mista*e in financial statements.
E0PECTED ERROR $see Audit sampling%
E0PERTAn e)pert is a person or firm possessing special s*ill, *noledge and e)perience
in a particular field other than accounting and auditing.
E0TERNAL AUDIT1AUDITOR$see Auditor%
E0TERNAL CONFIRMATION')ternal confirmation is the process of o!taining and evaluating audit
evidence through a direct communication from a third party in response to a request for information a!out
a particular item affecting assertions made !y management in the financial statements.
FAIR VALUE(he amount for hich an asset could !e e)changed, or a lia!ility settled, !eteen
*noledgea!le, illing parties in an arm,s length transaction.
FINANCIAL STATEMENTS(he !alance sheets, income statements or profit and loss accounts,
statements shoing either all changes in equity or changes in equity other than those arising from capital
transactions ith oners and distri!utions to oners, cash flo statements, notes and other statements
and e)planatory material hich are identified as !eing part of the financial statements.
SUMMARI2ED FINANCIAL STATEMENTSAn entity may prepare financial statements summarizing its
annual audited financial statements for the purpose of informing user groups interested in the highlights
only of the entity,s financial performance and position.
FINANCIAL STATEMENT ASSERTIONS.inancial statement assertions are assertions !y
management, e)plicit or otherise, that are em!odied in the financial statements and can !e categorized
as follos#
a% ')istence# an asset or a lia!ility e)ists at a given date&
!% /ights and o!ligations# an asset or a lia!ility pertains to the entity at a given date&
c% 1ccurrence# a transaction or event too* place hich pertains to the entity during the period&
d% 2ompleteness# there are no unrecorded assets, lia!ilities, transactions or events, or undisclosed
items&
e% ;aluation# an asset or lia!ility is recorded at an appropriate carrying value&
f% +easurement# a transaction or event is recorded at the proper amount and revenue or e)pense is
allocated to the proper period& and
g% Presentation and disclosure# an item is disclosed, classified, and descri!ed in accordance ith
the applica!le financial reporting frameor*.
FIRE3ALLA com!ination of hardare and softare that protects a 9A7, <A7 or P2 from
unauthorized access through the -nternet and from the introduction of unauthorized or harmful softare,
data or other material in electronic form.
FORECASTA forecast is prospective financial information prepared on the !asis of assumptions as to
future events hich management e)pects to ta*e place and the actions management e)pects to ta*e as
of the date the information is prepared $!est-estimate assumptions%.
FRAUD(he term fraud refers to an intentional act !y one or more individuals among management,
employees, or third parties, hich results in a misrepresentation of financial statements.
GENERAL CONTROLS IN COMPUTER INFORMATION SYSTEMS(he esta!lishment of a frameor*
of overall control over the computer information systems activities to provide a reasona!le level of
assurance that the overall o!0ectives of internal control are achieved.
GOING CONCERN ASSUMPTIONUnder the going concern assumption, an entity is ordinarily vieed
as continuing in !usiness for the foreseea!le future ith neither the intention nor the necessity of
liquidation, ceasing trading or see*ing protection from creditors pursuant to las or regulations.
Accordingly, assets and lia!ilities are recorded on the !asis that the entity ill !e a!le to realize its assets
and discharge its lia!ilities in the normal course of !usiness.
5
Gl!!"r# $ Term!
GOVERNANCE(he term governance descri!es the role of persons entrusted ith the supervision,
control and direction of an entity. (hose charged ith governance ordinarily are accounta!le for ensuring
that the entity achieves its o!0ectives, financial reporting, and reporting to interested parties. (hose
charged ith governance include management only hen it performs such functions.
GOVERNMENT ,USINESS ENTERPRISES8overnment !usiness enterprises are !usinesses hich
operate ithin the pu!lic sector ordinarily to meet a political or social interest o!0ective. (hey are ordinarily
required to operate commercially, that is, to ma*e profits or to recoup, through user charges a su!stantial
proportion of their operating costs.
INCOMING AUDITOR$see Auditor%
INHERENT RISK$see Audit ris*%
IN-UIRY -nquiry consists of see*ing information of *noledgea!le persons inside or outside the entity.
INSPECTION-nspection consists of e)amining records, documents, or tangi!le assets.
INTERIM FINANCIAL INFORMATION OR STATEMENTS.inancial information $hich may !e less
than full financial statements as defined a!ove% issued at interim dates $usually half yearly or quarterly% in
respect of a financial period.
INTERNAL AUDITING-nternal auditing is an appraisal activity esta!lished ithin an entity as a service
to the entity. -ts functions include, amongst other things, e)amining, evaluating and monitoring the
adequacy and effectiveness of the accounting and internal control systems.
INTERNAL CONTROL SYSTEMAn internal control system consists of all the policies and procedures
$internal controls% adopted !y the management of an entity to assist in achieving management,s o!0ective
of ensuring, as far as practica!le, the orderly and efficient conduct of its !usiness, including adherence to
management policies, the safeguarding of assets, the prevention and detection of fraud and error, the
accuracy and completeness of the accounting records, and the timely preparation of relia!le financial
information. (he internal control system e)tends !eyond these matters hich relate directly to the
functions of the accounting system.
IT ENVIRONMENT(he policies and procedures that the entity implements and the -( infrastructure
$hardare, operating systems, etc% and application softare that it uses to support !usiness operations
and achieve !usiness strategies.
KNO3LEDGE OF THE ,USINESS(he auditor,s general *noledge of the economy and the industry
ithin hich the entity operates and a more particular *noledge of ho the entity operates.
LIMITATION ON SCOPEA limitation on the scope of the auditor,s or* may sometimes !e imposed !y
the entity $for e)ample, hen the terms of the engagement specify that the auditor ill not carry out an
audit procedure that the auditor !elieves is necessary%. A scope limitation may !e imposed !y
circumstances $for e)ample, hen the timing of the auditor,s appointment is such that the auditor is
una!le to o!serve the counting of physical inventories%. -t may also arise hen, in the opinion of the
auditor, the entity,s accounting records are inadequate or hen the auditor is una!le to carry out an audit
procedure !elieved desira!le.
LOCAL AREA NET3ORK .LAN/A communications netor* that serve users ithin a confined
geographical area. <A7s ere developed to facilitate the e)change and sharing of resources ithin an
organization, including data, softare, storage, printers and telecommunications equipment. (hey allo
for decentralized computing. (he !asic components of a <A7 are transmission media and softare, user
terminals and shared peripherals.
MANAGEMENT+anagement comprises officers and others ho also perform senior managerial
functions. +anagement includes directors and the audit committee only in those instances hen they
perform such functions.
MANAGEMENT REPRESENTATIONS/epresentations made !y management to the auditor during the
course of an audit, either unsolicited or in response to specific inquiries.
MATERIAL INCONSISTENCYA material inconsistency e)ists hen other information contradicts
information contained in the audited financial statements. A material inconsistency may raise dou!t a!out
the audit conclusions dran from audit evidence previously o!tained and, possi!ly, a!out the !asis for the
auditor,s opinion on the financial statements.
MATERIAL MISSTATEMENT OF FACTA material misstatement of fact in other information e)ists
hen such information, not related to matters appearing in the audited financial statements, is incorrectly
stated or presented.
6
Gl!!"r# $ Term!
MATERIAL 3EAKNESSES(he ea*nesses in internal control that could have a material effect on the
financial statements.
MATERIALITY-nformation is material if its omission or misstatement could influence the economic
decisions of users ta*en on the !asis of the financial statements. +ateriality depends on the size of the
item or error 0udged in the particular circumstances of its omission or misstatement. (hus, materiality
provides a threshold or cutoff point rather than !eing a primary qualitative characteristic hich information
must have if it is to !e useful.
MISSTATEMENTA mista*e in financial information hich ould arise from errors and fraud.
MODIFIED AUDITOR+S REPORTAn auditor,s report is considered to !e modified if either an emphasis
of matter paragraph$s% is added to the report or if the opinion is other than unqualified#
+A(('/" (:A( 31 71( A..'2( (:' AU3-(1/, " 1P-7-17
EMPHASIS OF MATTER PARAGRAPH.S/An auditor,s report may !e modified !y adding an emphasis
of matter paragraph$s% to highlight a matter affecting the financial statements hich is included in a note
to the financial statements that more e)tensively discusses the matter. (he addition of such an emphasis
of matter paragraph$s% does not affect the auditor,s opinion. (he auditor may also modify the auditor,s
report !y using an emphasis of matter paragraph$s% to report matters other than those affecting the
financial statements.
+A(('/" (:A( 31 A..'2( (:' AU3-(1/, " 1P-7-17
-UALIFIED OPINIONA qualified opinion is e)pressed hen the auditor concludes that an unqualified
opinion cannot !e e)pressed !ut that the effect of any disagreement ith management, or limitation on
scope is not so material and pervasive as to require an adverse opinion or a disclaimer of opinion.
DISCLAIMER OF OPINIONA disclaimer of opinion is e)pressed hen the possi!le effect of a limitation
on scope is so material and pervasive that the auditor has not !een a!le to o!tain sufficient appropriate
audit evidence and accordingly is una!le to e)press an opinion on the financial statements.
ADVERSE OPINIONAn adverse opinion is e)pressed hen the effect of a disagreement is so material
and pervasive to the financial statements that the auditor concludes that a qualification of the report is not
adequate to disclose the misleading or incomplete nature of the financial statements.
AU3-(-78
NATIONAL PRACTICES .AUDITING/ -A set of auditing guidelines not having the authority of standards
defined !y an authoritative !ody at a country level and commonly applied !y
auditors in the conduct of an audit or related services.=(his definition does not apply in the Philippines and
is therefore not used.>
NATIONAL STANDARDS .AUDITING/A set of auditing standards defined !y the Auditing "tandards
and Practices 2ouncil or !y la or regulations or an authoritative !ody at the country level, the application
of hich is mandatory in conducting an audit or related services and hich should !e complied ith in the
conduct of an audit or related services.
NONCOMPLIANCE(he term noncompliance is used to refer to acts of omission or commission !y the
entity !eing audited, either intentional or unintentional, hich are contrary to the prevailing las or
regulations.
NON-SAMPLING RISK$see Audit sampling%
O,SERVATION1!servation consists of loo*ing at a process or procedure !eing performed !y others,
for e)ample, the o!servation !y the auditor of the counting of inventories !y the entity,s personnel or the
performance of internal control procedures that leave no audit trail.
OPENING ,ALANCES1pening !alances are those account !alances hich e)ist at the !eginning of
the period. 1pening !alances are !ased upon the closing !alances of the prior period and reflect the
effects of transactions of prior periods and accounting policies applied in the prior period.
OPINION(he auditor,s report contains a clear ritten e)pression of opinion on the financial statements
as a hole. An unqualified opinion is e)pressed hen the auditor concludes that the financial statements
are presented fairly, in all material respects, in accordance ith the identified financial reporting
frameor*. $"ee +odified auditor,s report%
OTHER AUDITOR$see Auditor%

Gl!!"r# $ Term!
PCS OR PERSONAL COMPUTERS .ALSO REFERRED TO AS MICROCOMPUTERS/'conomical
yet poerful self-contained general purpose computers consisting typically of a monitor $visual display
unit%, a case containing the computer electronics and a *ey!oard $and mouse%. (hese features may !e
com!ined in porta!le computers =laptops>. Programs and data may !e stored internally on a hard dis* or
on remova!le storage media such as 23s or floppy dis*s. P2s may !e connected to on-line netor*s,
printers and other devices such as scanners and modems.
PERSONNEL$see Auditor%
PLANNINGPlanning involves developing a general strategy and a detailed approach for the e)pected
nature, timing and e)tent of the audit.
POPULATION$see Audit sampling%
POST ,ALANCE SHEET EVENTS$see "u!sequent events%
PREDECESSOR AUDITOR$see Auditor%
PRINCIPAL AUDITOR$see Auditor%
PROGRAMMING CONTROLSProcedures designed to prevent or detect improper changes to
computer programs that are accessed through on-line terminal devices. Access may !e restricted !y
controls such as the use of separate operational and program development li!raries and the use of
specialized program li!rary softare. -t is important for on-line changes to programs to !e adequately
documented, controlled and monitored.
PRO4ECTIONA pro0ection is prospective financial information prepared on the !asis of#
a% :ypothetical assumptions a!out future events and management actions hich are not
necessarily e)pected to ta*e place, such as hen some entities are in a start-up phase or are
considering a ma0or change in the nature of operations& or
!% A mi)ture of !est-estimate and hypothetical assumptions.
PROSPECTIVE FINANCIAL INFORMATIONProspective financial information is financial information
!ased on assumptions a!out events that may occur in the future and possi!le actions !y an entity.
Prospective financial information can !e in the form of a forecast, a pro0ection or a com!ination of !oth.
$"ee .orecast and Pro0ection%
PU,LIC SECTOR(he term pu!lic sector refers to national governments, regional $for e)ample,
provincial, territorial% governments, local $for e)ample, city, ton% governments and related governmental
entities $for e)ample, agencies, !oards, commissions and enterprises%.
-UALIFIED OPINION$see +odified auditor,s report%
-UALITY CONTROLS(he policies and procedures adopted !y a firm to provide reasona!le assurance
that all audits done !y the firm are !eing carried out in accordance ith the 1!0ective and 8eneral
Principles 8overning an Audit of .inancial "tatements, as set out in Philippine "tandard on Auditing ??5
@uality 2ontrol for Audit 9or*.
REASONA,LE ASSURANCE-n an audit engagement, the auditor provides a high, !ut not a!solute,
level of assurance, e)pressed positively in the audit report as reasona!le assurance, that the information
su!0ect to audit is free of material misstatement.
RELATED PARTIES/elated parties and related party transaction are defined in -nternational
Accounting "tandard ?A $-A" ?A% as#
Related partyParties are considered to !e related if one party has the a!ility to control the other
party or e)ercise significant influence over the other party in ma*ing financial and operating
decisions.
RELATED PARTY TRANSACTIONA transfer of resources or o!ligations !eteen related parties,
regardless of hether a price is charged.
RELATED SERVICES/elated services comprise revies, agreed-upon procedures and compilations.
REVIE3 ENGAGEMENT(he o!0ective of a revie engagement is to ena!le an auditor to state
hether, on the !asis of procedures hich do not provide all the evidence that ould !e required in an
audit, anything has come to the auditor,s attention that causes the auditor to !elieve that the financial
statements are not prepared, in all material respects, in accordance ith an identified financial reporting
frameor*.
SAMPLING RISK$see Audit sampling%
SAMPLING UNIT$see Audit sampling%
!
Gl!!"r# $ Term!
SCOPE OF AN AUDIT5(he term scope of an audit refers to the audit procedures deemed necessary
in the circumstances to achieve the o!0ective of the audit.
SCOPE OF A REVIE3(he term scope of a revie refers to the revie procedures deemed
necessary in the circumstances to achieve the o!0ective of the revie.
SCOPE LIMITATION$see <imitation on scope%
SEGMENT INFORMATION-nformation in the financial statements regarding distinguisha!le
components or industry and geographical aspects of an entity.
AU3-(-78
SERVICE ORGANI2ATIONA client may use a service organization such as one that e)ecutes
transactions and maintains related accounta!ility or records transactions and processes related data
$e.g., a computer information systems service organization%.
SIGNIFICANCE"ignificance is related to materiality of the financial statement assertion affected.
SMALL ENTITYA small entity is any entity in hich#
a% (here is concentration of onership and management in a small num!er of individuals $often a
single individual%& and
!% 1ne or more of the folloing are also found#
4. .e sources of income&
?. Unsophisticated record-*eeping& and
B. <imited internal controls together ith the potential for management override of controls.
"mall entities ill ordinarily display characteristic $a%, and one or more of the characteristics included
under $!%.
SPECIAL PURPOSE AUDITOR+S REPORTA report issued in connection ith the independent audit of
financial information other than an auditor,s report on financial statements, including#
4. .inancial statements prepared in accordance ith a comprehensive !asis of accounting other
than Philippine .inancial /eporting "tandards&
?. "pecified accounts, elements of accounts, or items in a financial statement&
B. 2ompliance ith contractual agreements& and
A. "ummarized financial statements.
STATISTICAL SAMPLING$see Audit sampling%
STRATIFICATION$see Audit sampling%
SU,SE-UENT EVENTS-A" 45 identifies to types of events !oth favora!le and unfavora!le occurring
after period end#
4. (hose that provide further evidence of conditions that e)isted at period end& and
?. (hose that are indicative of conditions that arose su!sequent to period end.
SU,STANTIVE PROCEDURES"u!stantive procedures are tests performed to o!tain audit evidence to
detect material misstatements in the financial statements, and are of to types#
a% (ests of details of transactions and !alances& and
!% Analytical procedures.
SUFFICIENCY"ufficiency is the measure of the quantity of audit evidence.
SUMMARI2ED FINANCIAL STATEMENTS$see .inancial statements%
SUPREME AUDIT INSTITUTION(he pu!lic !ody of a "tate hich, hoever designated, constituted or
organized, e)ercises !y virtue of la, the highest pu!lic auditing function of that "tate.
TESTS OF CONTROL(ests of control are performed to o!tain audit evidence a!out the effectiveness
of the#
a% 3esign of the accounting and internal control systems, that is, hether they are suita!ly designed
to prevent or detect and correct material misstatements& and
!% 1peration of the internal controls throughout the period.
TOLERA,LE ERROR$see Audit sampling%
TRANSACTION LOGS/eports that are designed to create an audit trail for each on-line transaction.
"uch reports often document the source of a transaction $terminal, time and user% as ell as the
transaction,s details.
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Gl!!"r# $ Term!
UNCERTAINTY An uncertainty is a matter hose outcome depends on future actions or events not
under the direct control of the entity !ut that may affect the financial statements.
UN-UALIFIED OPINION$see 1pinion%
3ALK-THROUGH TESTA al*-through test involves tracing a fe transactions through the accounting
system.
3IDE AREA NET3ORK .3AN/A communications netor* that transmits information across an
e)panded area such as !eteen plant sites, cities and nations. 9A7s allo for on-line access to
applications from remote terminals. "everal <A7s can !e interconnected in a 9A7.
3ORKING PAPERS9or*ing papers are a record of the auditor,s planning& nature, timing and e)tent of
the auditing procedures performed& and results of such procedures and the conclusions dran from the
evidence o!tained. 9or*ing papers may !e in the form of data stored on paper, film, electronic media or
other media.
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