Armenia Auditor Qualification Exam key terms

An accounting method that records revenue when earned and expenses when incurred, regardless of when cash changes hands. It underpins IFRS financial statements and gives a more faithful picture of performance than cash receipts alone.

The requirement that financial statements represent faithfully the entity's financial position, performance and cash flows in accordance with the applicable reporting framework. Departures are permitted only in extremely rare circumstances with full disclosure.

The assumption that an entity will continue operating for the foreseeable future without liquidation or ceasing trade. Management assesses it, and the auditor evaluates whether the assessment is appropriate and adequately disclosed.

A simplified, self-contained set of international reporting requirements designed for entities without public accountability. It reduces disclosure and measurement complexity compared with full IFRS.

The currency of the primary economic environment in which an entity operates. It determines how foreign currency transactions are initially recorded and translated under IAS 21.

The threshold above which omissions or misstatements could reasonably influence economic decisions of users. It is a matter of professional judgement and applies to both financial reporting and audit planning and evaluation.

Globally recognised standards issued by the IAASB that govern how an audit of financial statements is planned, performed and reported. Armenian auditing practice is aligned with these standards.

The risk that the auditor expresses an inappropriate opinion on financial statements that are materially misstated. It comprises inherent risk, control risk and detection risk, and drives the design of audit procedures.

The susceptibility of an assertion to material misstatement before considering any related internal controls. It is higher for complex, judgemental or fraud-prone areas such as estimates and revenue recognition.

The risk that a material misstatement will not be prevented or detected on a timely basis by the entity's internal controls. The auditor assesses it after evaluating control design and implementation.

The risk that audit procedures fail to detect a material misstatement. Unlike inherent and control risk, it is controlled by the auditor through the nature, timing and extent of testing.

The processes, policies and procedures designed by those charged with governance to provide reasonable assurance about reliable reporting, effective operations and compliance with laws. It includes the control environment, risk assessment, control activities, information and monitoring.

A control that separates incompatible responsibilities, such as authorising a transaction, recording it and safeguarding the related assets, so that no single person can both commit and conceal an error or fraud.

Tracing one or a few transactions through the entire accounting system from origination to reporting. It confirms the auditor's understanding of the process and whether controls are designed and implemented as described.

Procedures performed to evaluate whether controls operate effectively throughout the period. Evidence usually comes from inquiry combined with inspection, observation or reperformance, not inquiry alone.

Procedures designed to detect material misstatements at the assertion level. They include tests of details and substantive analytical procedures, and their extent increases as assessed risk of misstatement rises.

All information used by the auditor to reach the conclusions on which the audit opinion is based. It must be sufficient in quantity and appropriate in relevance and reliability, with external written evidence generally preferred.

Direct written response from a third party, such as a bank or customer, obtained by the auditor to corroborate information. It is a highly reliable form of evidence when responses are properly controlled.

Applying procedures to less than the whole population so that each sampling unit has a chance of selection, enabling the auditor to draw conclusions about the population. Sampling risk must be managed and documented.

An attitude of questioning alertness to conditions suggesting possible misstatement, whether from error or fraud. It requires the auditor not to accept evidence at face value without corroboration.

The risk of intentional misstatement arising from fraudulent reporting or misappropriation of assets. The auditor is required to presume risks of fraud in revenue recognition and to address management override of controls.

An amount set below overall materiality to reduce to an appropriately low level the probability that uncorrected and undetected misstatements together exceed materiality. It guides the extent of testing.

The auditor's formal conclusion on whether financial statements are prepared, in all material respects, in accordance with the applicable framework. It may be unmodified or modified as qualified, adverse or a disclaimer.

Matters of most significance in the audit, selected from those communicated with those charged with governance. They are reported in listed-entity audits to give users insight into the auditor's judgement.

An objective evaluation of significant judgements and conclusions before the audit report is issued, performed for listed entities and other higher-risk engagements. The reviewer must be independent of the engagement team.

Freedom from relationships or interests that could compromise objectivity, comprising independence of mind and appearance. Safeguards must be applied, and certain prohibited interests cannot be safeguarded at all.

A state of mind that allows a professional to act without bias, conflict of interest or undue influence of others. It is a fundamental ethical principle supported by independence where required.

A threat to independence arising when an auditor evaluates results of previous work, such as preparing records later audited or designing a system later assessed. It cannot always be reduced to an acceptable level.

The firm's system of policies and procedures designed to provide reasonable assurance of compliance with standards and ethical requirements. It covers leadership, engagement performance, monitoring and documentation.

An ethical requirement to maintain the knowledge and skill needed for the work and to act diligently in accordance with applicable standards. It includes keeping up to date with technical and legal developments.

An indirect tax charged on the supply of goods and services, with registered businesses collecting it from customers and offsetting input tax. Registration thresholds and filing deadlines follow the Armenian Tax Code.

The Armenian tax on taxable profit of legal entities, computed from accounting profit adjusted for allowable and disallowable items. Rates and deductions are set by the Tax Code.

A review by tax authorities of a taxpayer's records and returns to verify compliance. Auditors must consider tax exposures and related contingencies when assessing liabilities and disclosures.

A tax asset or liability recognised for temporary differences between accounting carrying amounts and tax bases, measured under IAS 12. It reflects tax consequences expected to arise when assets are recovered or liabilities settled.

The ability of a person or entity to hold rights and to enter binding transactions under Armenian civil law. It is distinct from legal capacity of natural persons to act independently and is central to audit client acceptance.

The firm's decision to take on a new engagement after evaluating integrity of the client, competence to perform the work, and independence. Documentation of the decision is required under quality control standards.

A written agreement setting out the scope, responsibilities, basis of fees and reporting terms of an audit. It reduces the risk of misunderstanding between auditor and client.

The authorisation granted to individuals and firms to conduct statutory audits in Armenia, subject to qualification, experience and continuing education requirements. Breach of licensing conditions can lead to disciplinary liability.

Independent external regulation of the audit profession, including inspection of audit firms and enforcement of standards. It exists to protect the public interest beyond self-regulation by professional bodies.

The legal exposure of an auditor to civil claims for negligence or breach of contract and to disciplinary or criminal sanction. Scope limitations and liability caps are often addressed in the engagement letter.

A management accounting technique comparing budgeted or standard figures with actual results to explain differences. It helps identify operational issues and supports decision making and performance evaluation.

Calculating the sales volume at which total revenue equals total cost, where fixed costs are covered and profit is zero. It supports pricing, cost and capacity decisions and links to margin of safety.