ACCA AAA flashcards

33 cards. Read the term and the definition here. The deck at the top of this page is optional.

Reasonable assurance

High but not absolute level of assurance obtained by the auditor, reflecting inherent limitations such as sampling risk, estimation uncertainty and the possibility of fraud concealment.

Professional scepticism

An attitude involving a questioning mind, alertness to conditions indicating possible misstatement, and critical assessment of audit evidence throughout the engagement.

Independence of mind

The state of mind enabling the expression of a conclusion without being affected by influences that compromise professional judgement, allowing the auditor to act with integrity.

Self-interest threat

A threat arising when a financial or other interest of the firm or engagement team member inappropriately influences their judgement or behaviour, such as holding client shares.

Self-review threat

A threat arising when the firm evaluates the results of a previous judgement or service it performed, such as auditing figures it helped prepare.

Advocacy threat

A threat arising when the firm promotes a client's position or defends the client in a dispute, compromising subsequent objectivity in the audit.

Familiarity threat

A threat arising from a long or close relationship with a client, such as long association of senior staff or a close family member in a key client role.

Intimidation threat

A threat arising when a client or other party pressures the auditor through threats of litigation, dismissal or reduced fees, deterring objective professional judgement.

Contingent fee prohibition

Audit fees cannot be contingent on the outcome of the audit; for non-assurance services, contingent fees are restricted where they create self-interest or advocacy threats.

Fee dependency safeguard

Where recurring fees from one client exceed 15% of total firm fees, disclosure to those charged with governance and an external quality control review are considered.

Confidentiality exceptions

The duty of confidentiality may be overridden where disclosure is permitted by law, required by law such as money-laundering reporting, or consented to by the client.

ISQM 1 scope

The standard requiring firms to design, implement and operate a system of quality management addressing eight components, including governance, risk assessment and monitoring.

Engagement quality review

An objective evaluation of the significant judgements and conclusions of the engagement team, performed before the report is issued by a reviewer not on the team.

ISQM 2 applicability

Requires an engagement quality review for audits of listed entities and for other engagements where the firm determines, based on risk, that a review is needed.

Engagement partner responsibility

Under ISA 220 (Revised), the engagement partner is responsible for the overall quality of the engagement, including direction, supervision and review of the team.

Root cause analysis

A monitoring and remediation process under ISQM 1 that investigates the underlying causes of identified deficiencies rather than only the symptoms.

Documentation assembly deadline

The auditor's final audit file should be assembled on a timely basis, ordinarily within 60 days after the date of the auditor's report.

Performance materiality

An amount set below overall materiality to reduce to an appropriately low level the probability that uncorrected and undetected misstatements exceed overall materiality.

Audit risk model

Audit risk equals inherent risk multiplied by control risk multiplied by detection risk; detection risk is the component the auditor controls through the nature, timing and extent of procedures.

Significant risk

An identified risk of material misstatement judged close to the upper end of the spectrum of inherent risk, requiring specific audit procedures and understanding of controls.

ISA 540 estimate evaluation

The auditor evaluates the method, assumptions and data used by management, and considers whether management bias indicates possible misstatement in an accounting estimate.

Management override presumption

ISA 240 presumes a risk of fraud from management override of controls, requiring journal entry testing and review of accounting estimates for bias.

Revenue recognition presumption

ISA 240 presumes a fraud risk in revenue recognition; this presumption may be rebutted only if documented as not applicable.

Qualified opinion

Issued when the auditor obtains sufficient evidence but misstatements are material, or evidence is unavailable, and the effect is not pervasive.

Adverse opinion

Issued when misstatements are both material and pervasive to the financial statements, meaning the statements as a whole are misstated.

Disclaimer of opinion

Issued when the auditor cannot obtain sufficient appropriate evidence and the possible effects are material and pervasive.

Key audit matters

Matters selected from those communicated with those charged with governance that were most significant in the audit, required for listed entity audits under ISA 701.

ISA 800 special purpose

Applies where financial statements are prepared under a special purpose framework; the opinion states compliance with that framework and distribution may be restricted.

ISA 805 single elements

Applies to audits of a single financial statement or specific elements, accounts or items; materiality is considered for those elements separately.

ISAE 3402 Type 2

A service organisation report covering both the description and suitability of controls and their operating effectiveness over a specified period.

Agreed-upon procedures

An engagement under ISRS 4400 where the practitioner reports factual findings without expressing assurance, and the report is restricted to specified parties.

Compilation engagement

An engagement under ISRS 4410 where the accountant assists management in preparing financial statements and expresses no assurance on them.

Limited assurance conclusion

A conclusion expressed in a review engagement indicating whether anything has come to the practitioner's attention suggesting the financial statements are not prepared in accordance with the framework.