Вы находитесь на странице: 1из 3

CHAPTER 5 Professional Auditing Standards and the Audit Opinion

12
Formulation Process
Accounting cycle
Recording and processing transactions that affect a group of related
accounts. The cycle begins when a transaction occurs and ends when it
is recorded in the financial statements.
Audit documentation
The record of audit procedures performed, relevant audit evidence
obtained, and conclusions the auditor reached (terms such as working
papers or workpapers are also sometimes used).
Audit engagement letter
A document that specifies the responsibilities of both the client and the
auditor.
Audit evidence
Information used by the auditor in arriving at the conclusions on which
the auditors opinion is based.
Appropriate audit evidence
The measure of the quality of audit evidence (that is, its relevance and
reliability in providing support for the conclusions on which the
auditors opinion is based).
Audit procedures
Procedures designed to obtain audit evidence to support the audit
opinion(s). Three categories of procedures include risk assessment
procedures, tests of controls, and substantive procedures (including
substantive analytical procedures and tests of details).
Audit program
An audit document that lists the audit procedures to be followed in
gathering audit evidence and helps those in charge of the audit to
monitor the progress and supervise the work.
Control risk
The risk that a misstatement due to error or fraud that could occur in
an assertion and that could be material, individually or in combination
with other misstatements, will not be prevented or detected on a
timely basis by the organizations internal control. Control risk is a

CHAPTER 5 Professional Auditing Standards and the Audit Opinion


13
Formulation Process
function of the effectiveness of the design and operation of internal
control.
Controls reliance audit
An audit that includes tests of controls and substantive procedures.
Dual-purpose test
A substantive test and a related test of a relevant control that are
performed concurrently, for example a substantive test of sales
transactions performed concurrently with a test of controls over those
transactions.
Inherent risk
The susceptibility of an assertion to a misstatement, due to error or
fraud, that could be material, individually or in combination with other
misstatements, before consideration of any related controls.
Risk assessment procedure
A procedure performed by the auditor to obtain information for
identifying and assessing the risks of material misstatement in the
financial statements whether due to error or fraud. Risk assessment
procedures by themselves do not provide sufficient
appropriate evidence on which to base an audit opinion, but are used
for purposes of planning the audit.
Substantive audit
An audit that includes substantive procedures and does not include
tests of controls.
Substantive procedure
An audit procedure designed to detect material misstatements at the
assertion level. Substantive procedures comprise tests of details and
substantive analytical procedures.
Sufficient audit evidence
The measure of the quantity of audit evidence.
Test of controls

CHAPTER 5 Professional Auditing Standards and the Audit Opinion


14
Formulation Process
An audit procedure designed to evaluate the operating effectiveness of
controls in preventing, or detecting and correcting, material
misstatements, typically at the assertion level.