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CEBU CPAR CENTER

Mandaue City, Cebu

AUDITING THEORY

PREWEEK LECTURE

Glossary of Terms

1. The series of tasks and records of an entity by which transactions are processed as a meansof maintaining financial records.

a.Computer information systemc.

Accounting systemb.

Internal control systemd.Control enironment

The measure of the !uality of audit eidence and its releance to a particular assertion and itsreliability.

a."ufficiencyc."ignificance

b.Appropriatenessd.

Assurance#.

It seres as a set of instructions to assistants inoled in the audit and as a means to control

the proper e$ecution of the work.

a.Audit programc.%ngagement letter

b.&erall audit pland.Internal control !uestionnaire

'etection risk isThe risk that the auditor gies an inappropriate audit opinion when the financial statements are

materially misstated.The risk that a misstatement, that could occur in an account balance or class of transactions andthat could be material indiidually or when aggregated with misstatements in other balances or

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assuming that there were no related internal controls.

Tolerable error meansAn error that arises from an isolated eent that has not recurred other than on specificallyidentifiable occasions and is therefore not representatie of errors in the population.

An error that the auditor e$pects to be present in the population.The ma$imum error in a population that the auditor is willing to accept.The possibility that the auditor(s conclusion, based on a sample may be different from theconclusion reached if the entire population were sub)ected to the same audit procedure.

The current period*s auditor who did not audit the prior period*s financial statements is calleda.+redecessor auditor.c.Incoming auditor.b.&ther auditor.d.+rincipal auditor

+rincipal auditor isThe auditor who audited and reported on the prior period(s financial statements and continues asthe auditor for the current period.

A current period(s auditor who did not audit the prior period(s financial statements.The auditor who was preiously the auditor of an entity and who has been replaced by an incomingauditor.The auditor with responsibility for reporting on the financial statements of an entity when thosefinancial statements include financial information of one or more components audited by anotherauditor.

They are not presented as complete financial statements capable of standing alone, but are anintegral part of the current period.

a.Corresponding figuresc."upplementary report

b.Comparatie financial statementsd.otes of financial statements-.

The applications of auditing procedures using the computer as an audit tool refer to

a.Integrated test facilityc.

Auditing through the computer

b.'atabased management systemd.Computer assisted audit techni!ues

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1/. A collection of files that is shared and used by a number of different users.a.'atabasec.Master fileb.Information file

d.Transaction file

A report, separate from the financial statements, in which an entity proides third parties with!ualitatie information on the entity(s commitments towards the enironmental aspects of thebusiness, its policies and targets in that field, its achieement in managing the relationship

between its business processes and enironmental risk, and !uantitatie information on itsenironmental performance.

a.%nironmental performance reportc.%nironmental riskb.

Annual reportd."pecial purpose audit report

10. Comprises officers and others who also perform senior managerial functions.a.Managementc.

Audit committeeb.Goernanced.oard of directors

It e$ists when other information contradicts information contained in the audited financialstatements.

a.Material inconsistency

c.Material weaknessesb.Material misstatement of factd.Misstatement

12. The policies and procedures adopted by a firm to proide reasonable assurance that all auditsdone by the firm are being carried out in accordance with the &b)ectie and General +rinciplesGoerning an Audit of 3inancial "tatements.a.Internal controls

c.+eer reiewb.

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c.'ecentrali8ationb.7elated sericesd.Centrali8ed operations

7efers to the audit procedures deemed necessary in the circumstances to achiee the ob)ectie ofthe audit.

a."cope of an audit

c.Audit program

b."cope of a reiew

d."cope limitation

19.

Itrelates to materiality of the

financialstatement assertionsaffectedbythecomputer

processing.

a.Threshold

c.Comple$ity

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A report issued in connection with the independent audit of financial information other than anauditor(s report on financial statements.a."pecial purpose auditor(s reportc.

Annual reportb.Compilation reportd.Modified auditor*s report

"ubstantie procedures are tests performed to obtain audit eidence to detect materialmisstatements in the financial statements. These includea. Test of details of transactionsc."ubstantie analytical proceduresb. Test of details of balancesd.

All of the aboe.0/. Inoles tracing a few transactions through the accounting system.a.Test of controlsc.

Analytical proceduresb.5alkthrough testd."ubstantie procedures

&eriew of auditing :Related PSAs : +"A 1//, 10/, 0// and ;1/