Auditing For Dummies
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Every profession has its own lexicon. To communicate with your audit peers and supervisors, you must know key auditing phrases. Knowing these buzzwords is also helpful if you’re a business owner, because auditors sometimes forget to switch from audit-geek talk to regular language when speaking with you.
  • Audit evidence: Facts gathered during the audit procedures that provide a reasonable basis for forming an opinion regarding the financial statements under audit.

  • Audit risk: The risk of forming an inappropriate opinion on the financial statements under audit.

  • Control risk: The risk that a company’s internal controls won’t detect or prevent mistakes.

  • Due professional care: Taking the time to gather reasonable audit evidence to support the fact that the financial statements are free of material misstatement.

  • Generally accepted accounting principles (GAAP): Standard U.S. accounting guidelines for reporting financial statement transactions.

  • Generally accepted auditing standards (GAAS): Standard U.S. auditing guidelines for planning, conducting, and reporting on audits.

  • Going concern: The expectation that a business will remain operating for at least another 12 months.

  • Independence: Having an arm’s-length relationship — meaning no special or close relationship — with the client under audit.

  • Inherent risk: The likelihood of arriving at an inaccurate audit conclusion based on the nature of the client’s business.

  • Internal controls: The operating standards a client uses to prevent or uncover mistakes.

  • Management assertions: Representations the managers of a company make on the financial statements.

  • Materiality: The importance placed on an area of financial reporting based on its overall significance.

  • Objectivity: The ability to evaluate client records with no preconceived notions or prejudices.

  • Professional skepticism: Approaching an audit with a questioning mind-set.

  • Sampling: Selecting a small but pertinent and representative number of records to represent the entire population of records.

About This Article

This article is from the book:

About the book author:

Maire Loughran is a self-employed certified public accountant (CPA) who has prepared compilation, review, and audit reports for fifteen years. Additionally, she is a university professor of undergraduate- and graduate-level accounting classes.

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