Audit Chapter 16
uncorrected misstatement
Misstatements that have not been reflected in the financial statements. Ordinarily these are misstatements the auditors have identified and for which proposed adjusting entries have not been recorded.
Factual Misstatements
misstatements about which there is no doubt
Analytical Procedures
Evaluations of financial information through analysis of plausible relationships among both financial and nonfinancial data.
commitments
A contractual obligation to carry out a transaction at specified terms in the future. Material commitments should be disclosed in the financial statements.
minutes
A formal record of the issues discussed and actions taken in meetings of stockholders and the board of directors.
letter of inquiry
A letter sent by auditors to a client's legal counsel requesting a description and evaluation of pending or threatened litigation, unasserted claims, and other loss contingencies.
Conservatism
An accounting doctrine for asset valuation in which the lower of two alternative acceptable asset valuations is chosen.
subsequent event
An event occurring between the date of the financial statements and the date of the auditor's report.
Iron curtain approach
An approach to making materiality judgments that quantifies the total likely misstatement as of the current year-end based on the effects of reflecting all misstatements (including projecting misstatements where appropriate) existing in the balance sheet at the end of the current year, irrespective of whether the misstatements occurred in the current year or previous years..
Rollover approach
An approach to making materiality judgments that quantifies the total likely misstatement as of the current year-end based on the effects of reflecting misstatements (including projecting misstatements where appropriate) only during the current year.
General risk contingency
An element of the business environment that involves some risk of a future loss. Examples include the risk of accident, strike, price fluctuations, or natural catastrophe. General risk contingencies should not be disclosed in financial statements.
other information
Financial and nonfinancial information (other than the financial statements and the auditors' report thereon) included in an entity's annual report.
supplementary information
Information presented outside the basic financial statements, excluding required supplementary information, that is not considered necessary for the financial statements to be fairly presented in accordance with the applicable financial reporting framework.
Required Supplementary Information
Information that a designated accounting standards setter requires to accompany an entity's basic financial statements.
S-1 review
Procedures carried out by auditors at the client company's facilities on or as close as practicable to the effective date of a registration statement filed under the Securities Act of 1933.
Management review controls
Reviews conducted by management of estimates and other kinds of financial information for reasonableness.
Projected Misstatement
The auditors' best estimate of the misstatement in populations involving the projection of misstatements identified in audit samples to entire populations from which the samples were drawn
Report release date
The date the auditors grant the client permission to use the audit report in connection with the financial statements. This is sometimes referred to as the date of issuance of the audit report.
representation letter
A single letter or separate letters prepared by officers of the client company at the auditors' request setting forth certain representations about the company's financial position or operations.
Disclosure checklist
A list of specific disclosures required by the FASB, the GASB, the FASAC, and the SEC that is used to evaluate the adequacy of the disclosures in a set of financial statements.
unasserted claims
A possible legal claim of which no potential claimant has exhibited an awareness.
Contingent Liability
A possible liability, stemming from past events, that will be resolved as to existence and amount by some future event.
Loss Contingency
A possible loss, stemming from past events, that will be resolved as to existence and amount by some future event. Loss contingencies should be disclosed in notes to the financial statements if there is a reasonable possibility that a loss has been incurred.
emphasis of matter
A section (paragraph) included in the nonpublic company auditors' report that is required by GAAS or is included at the auditors' discretion, and that refers to a matter appropriately presented or disclosed in the financial statements that, in the auditors' judgment, is of such importance that it is fundamental to users' understanding of the financial statements (
misstatement
Differences between the amount, classification, presentation, or disclosure of reported financial statement items and the amount, classification, presentation, or disclosure that is required for the items to be presented fairly in accordance with the applicable financial reporting framework.
Judgmental Misstatements
differences arising from the judgments of management concerning accounting estimates that the auditor considers unreasonable or the selection or application of accounting policies that the auditor considers inappropriate
Identified misstatements
Misstatements found by the auditors during their audit These misstatements may or may not be corrected by management.
date of the financial statements
the date of the end of the latest period covered by the financial statements
