to recorded transactions and events have been recorded appropriately.

conformity with Accounting Standards.

reported as a current asset.

greater than or less than the tolerable deviation rate

Means matters normally included in the permanent audit documentation such as the analysis of balance sheet accounts and those relating to contingencies. Such information from a prior year is used by the auditor in the current year’s audit and is updated each year.

He is the auditor of the current year who also audited the financial statements of the client for the previous year.

A control designed to discover an unintended event or result.

The risk audit procedures will lead to a conclusion that material error does not exist when in fact such error does exist.

To misuse or embezzle funds.

A statement that the auditor is unable to express an opinion as to the presentation of financial statements in conformity with Indian GAAP.

Revealing information. Financial statement footnotes are one way of providing necessary disclosures.

Reasonableness, validity, limit and completeness tests that are programmed routines designed to check input  data and processing results for completeness, accuracy and reasonableness.

Producing a desired outcome. An audit procedure is effective if the evidence supports a correct conclusion.

The ratio of the audit evidence produced to audit resources used.

Unintentional misstatements or omissions in financial statements. Errors may involve mistakes in gathering or processing accounting data, incorrect estimates from oversight or misinterpretation of facts and mistakes in application of principles relating to amount, classification, presentation or disclosure.

Sampling to estimate the actual value of a population characteristic within a range of tolerable misstatement.

It identifies risks and opportunities, assesses them for likelihood and magnitude, determines responses strategy and monitors progress. ERM integrates strategic planning, operations management and internal control. Monitoring ERM is part of internal control activities.

A letter that represents the understanding about the engagement between the auditor and auditee. The letter identifies the financial statements and describes the nature of procedures to be performed. It includes the objectives of the procedures, an explanation that the financial information is the responsibility of the company’s management and a description of the form of report.

To take assets in violation of trust.

Extend means to multiply one number by another (to test extensions is to test the accuracy.

Fully and clearly expressed, leaving nothing implied.

A paragraph added to an audit report to explain something, such as the reason for a qualified or adverse opinion.

Assertions about existence deal with whether assets or liabilities exist at a given date. For example, management asserts that finished goods inventories in the balance sheet are available for sale.

As an audit procedure to examine something is to look at it critically.

A deliberate deception to secure unfair or unlawful gain.

A schematic representation of a sequence of operations in an accounting system or computer program.

A record to which monetary transactions are posted (in the form of debits and credits) from a journal. It is the final record from which financial statements are prepared. General ledger accounts are often control accounts that report totals of details included in subsidiary ledgers.

“Generally Accepted Auditing Standards.”

“Generally Accepted Accounting Principles.”

Going Concern Assumption assumes the company will continue in operation long enough to realize its investment in assets through operations (as opposed to sale).

Interim Financial Information is financial statements of a time period less than a full year.

Consistent adherence to an ethical code. If client management lacks integrity the auditor must be more skeptical than usual.

As an audit procedure, to scrutinize or critically examine a document.

The susceptibility of a balance or transaction class to error that could be material, when aggregated with other errors, assuming no related internal controls.

The potential effectiveness of an entity’s internal control is subject to inherent limitations. Human fallibility, collusion, and management override are examples.

This means freedom from bias, which is possible even when auditing one’s own business (independence in fact).

Implicitly

Of no importance. Something in financial statements that will not change decisions of investors.

A defect in the design or operation of internal controls. A material weakness is a reportable condition that does not reduce to a relatively low level the risk that material errors or fraud would not be detected in a timely manner by employees in the normal course of their duties.

A list of questions about the existing internal control system to be answered with answers such as yes, no, or not applicable) during audit fieldwork. The  understanding of the client’s internal controls.questionnaire is a part of the documentation of the auditor’s

Internal Auditors are employees or independent professionals responsible for providing analysis, evaluations, assurances, recommendations, and other information to the entity’s management and board. An important responsibility of internal auditors is to monitor performance of controls.

The availability of cash or ability to obtain it quickly. Debt paying ability.

An inventory system that attempts to minimize inventory costs that do not add value for the customer. It arranges for suppliers to deliver small quantities of raw materials just before those units are needed in production. Storing, insuring and handling raw materials are costs that add no value to the product and are minimized in a just in time system.

A book of original entry in a double-entry system. The journal lists all transactions and the accounts to which they are posted.

Information important enough to change an investor’s decision.  Insignificant information has no effect on decisions, so there is no need to report it. Materiality includes the absolute value and relationship of an amount to other information.

Manual Controls are controls performed manually, not by computer.

A letter addressed to the auditor, signed by the Board representative  generally. During an audit, management makes many representations to the auditor. Written representations from management in the letter confirm oral representations given to the auditor, document the continuing appropriateness of such representations and reduce the possibility of misunderstanding

Management Controls are controls performed by one or more managers.

Mitigating reducing in force or intensity.

Misstatement is a difference between the amount, classification, presentation or disclosure of a reported financial statement item and the amount, classification, presentation or disclosure that is required for
the item to be in accordance with the applicable financial reporting framework.

To embezzle or appropriate dishonestly for one’s own use.

Memos written records supporting journal entries. Credit memos support credits, while debit memos support debit entries.

Material Weakness is a deficiency in internal control such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis.

The negative form of accounts receivable confirmation asks the client’s customer to respond only if the customer disagrees with the balance determined by the client. The positive form asks the customer to respond
whether the customer agrees or disagrees with the client’s receivable balance. The negative form is used when controls over receivables are strong and accounts receivable consists of many accounts with small balances. The positive form is used when controls are weak or there are  fewer, but larger, accounts.

A written description of an internal control system.

A practice monitoring program in which the audit documentation of one auditor firm is periodically reviewed by independent partners of other firms to determine that it conforms to the standards of the profession.

The paragraph in the audit report that expresses the auditor’s conclusions.

An auditor’s conclusion held with confidence but not substantiated by positive knowledge or proof.

Watch and test a client action (such as taking inventory).

How an internal control was applied, the consistency with which it was applied, and by whom.

A document that initiates the manufacturing process.

The portion of an entity that acquires resources and converts them to the product or service for customers.

An action, such as a step performed as part of an audit program or as part of the client’s internal controls.

Probable

Preventative control

The positive form of receivables confirmation asks the customer to respond whether the customer agrees or disagrees with the client’s reported receivable balance.

It means having the power to influence. Most audit evidence is persuasive, but not conclusive.

An inventory accounting system updated for each addition to inventory and each issuance from inventory, so the records indicate the exact quantity on hand at any moment.

Permanent Audit Documentation includes items of continuing accounting significance, such as the analysis of balance sheet accounts and contingencies. Such information from a prior year is used in the current audit and updated each year. Sometimes called the continuing file.

An audit program is a listing of audit procedures to be performed in completing the audit. A computer program (software) is a listing of steps to be performed in processing the data.

A document from a buyer to a seller placing an order and listing quantities and specifications.

Expressed as a number, as opposed to qualitative measurement

Relating to the quality of a trait, as opposed to quantitative, which means expressed as a number.

In auditing, an auditor works within economic limits. The audit opinion, to be economically useful, must be formed in a reasonable time and at reasonable cost. The auditor must decide, exercising professional judgment, whether evidence available within limits of time and cost is sufficient to justify an opinion.

Different audit evidence provides different degrees of assurance to the auditor. When evidence can be obtained from independent sources outside an entity it provides greater assurance of reliability for an independent audit than that secured solely in the entity. More effective internal controls provide assurance about reliability of the accounting data and financial statements. The independent auditor’s direct personal knowledge, from physical examination, observation, computation, and inspection, is more persuasive than information obtained indirectly.

Related parties are those with whom the client has a relationship that might destroy the self-interest of one of the parties (accounting is based on measurement of arm’s length transactions). Related parties include affiliates of the client, principle owners, management (decision makers who control business policy) and members of their immediate families.

A schedule establishing agreement between separate sources of information such as accounting records reconciled with the financial statements.

Review evidence is information used by the accountant to provide a reasonable basis for the obtaining of limited assurance.

To examine again. The overall review of audit documentation is completed after field work.

The portion of a company that fills customer orders, accounts for receivables and collects those receivables.

A formal written request for something needed. A purchase by a company is initiated internally by a requisition, resulting in the issuance of a purchase order to the outside supplier.

A contingency with only a slight chance of occurring. In computer processing of information, a distant computer

An analysis of the possibility of suffering loss.

Risk assessment procedures are the audit procedures performed to obtain an understanding of the entity and its environment, including the entity’s internal control, to identify and assess the risks of material misstatement, whether due to fraud or error, at the financial statement and relevant assertion levels.

The number of population items selected when a sample is drawn from a population.

Unless the auditor examines 100% of the population, there is some chance the sample results will mislead the auditor. This risk is sampling error. The larger the sample, the less chance of sampling error and the greater the reliability of the results.

The type of engagement. The scope of an engagement might be a review, an audit or a compilation. A scope limitation is a restriction on the evidence the auditor can gather.

The paragraph in the audit report that explains the scope of the engagement.

Subsequent events affect the client and occur between the balance sheet date and issuance of the financial statements. Some such events provide additional evidence about conditions that existed at the balance sheet date, such as the bankruptcy of a customer with a history of financial difficulty. The financial statements are adjusted to reflect this evidence. Conditions that did not exist at the balance sheet date, such as fire that destroyed the client’s plant after the balance sheet date, may be so significant as to require disclosure.

An expert at activities not usually done by auditors (such as an appraiser for valuation).

Significant risk is an identified and assessed risk of material misstatement that, in the auditor’s judgment, requires special audit consideration.

Significant deficiency is a deficiency in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.

Segregation of dutiesmeans assigning different people the responsibilities of authorizing transactions, recording transactions, and maintaining custody of assets. Segregation of duties reduces the opportunities for
one person to both perpetrate and conceal errors or fraud.

Successor Auditor he auditor of a client for the current year previous. The auditor who no longer audits that client is the predecessor auditor.

Substantive audit procedure is a direct test of a financial statement balance designed to detect material misstatements at the assertion level. Substantive procedures comprise tests of details (classes of
transactions, account balances, and disclosures) and substantive analytical procedures

The detailed information that totals to the balance in the general ledger account. The total of all customer accounts receivable included in the subsidiary ledger of accounts receivable is the balance in the general
edger accounts receivable account.

Supported with proof or evidence.

Third parties are all persons, including those charged with governance, except for members of management.

Tolerable deviation rate is the maximum rate of deviation from an internal control that will allow the auditor to place the planned reliance on that control.

When planning a sample for a substantive test of details, the auditor considers how much deviation may exist without causing the financial statements to be materially misstated. This maximum acceptable deviation is the tolerable error or deviation for the sample.

An assertion made by management that each asset and liability is recorded at an appropriate carrying value.

A statistical measure of dispersion in a population. The variance is the square of the standard deviation. The standard deviation equals the square root of the arithmetic mean of the squares of deviations from the arithmetic mean.

Those who provide goods or services to an entity. These are also called suppliers.

An expert at activities not usually done by auditors (such as an appraiser for valuation).

Significant risk is an identified and assessed risk of material misstatement that, in the auditor’s judgment, requires special audit consideration.

Significant deficiency is a deficiency in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.

Segregation of duties means assigning different people the responsibilities of authorizing transactions, recording transactions, and maintaining custody of assets. Segregation of duties reduces the opportunities for one person to both perpetrate and conceal errors or fraud.

Successor Auditor he auditor of a client for the current year previous. The auditor who no longer audits that client is the predecessor auditor.

Substantive audit procedure is a direct test of a financial statement balance designed to detect material misstatements at the assertion level. Substantive procedures comprise tests of details (classes of transactions, account balances, and disclosures) and substantive analytical procedures

The detailed information that totals to the balance in the general ledger account. The total of all customer accounts receivable included in the subsidiary ledger of accounts receivable is the balance in the general ledger accounts receivable account.

Supported with proof or evidence.

Third parties are all persons, including those charged with governance, except for members of management.

Tolerable deviation rate is the maximum rate of deviation from an internal control that will allow the auditor to place the planned reliance on that control.

When planning a sample for a substantive test of details, the auditor considers how much deviation may exist without causing the financial statements to be materially misstated. This maximum acceptable deviation is the tolerable error or deviation for the sample.

An assertion made by management that each asset and liability is recorded at an appropriate carrying value.

A statistical measure of dispersion in a population. The variance is the square of the standard deviation. The standard deviation equals the square root of the arithmetic mean of the squares of deviations from the arithmetic mean.

Those who provide goods or services to an entity. These are also called suppliers.

Prove accuracy of numbers or existence of assets.

Prove accuracy of accounting entries by tracing to supporting documents.

A document in support of expenditure. The signature of an appropriate official on the voucher is authorization for the treasurer to issue a check.

Records kept by the auditor of procedures applied, tests performed, information obtained and pertinent conclusions in the engagement.

Cancellation of part or all of a balance. Costs incurred that have no future utility are charged (written-off) to an expense or loss account, not carried forward as an asset.

In Auditing, it is an intentional increase in the carrying value of an asset.