ICAEW Assurance key terms

An independent examination of financial information and the underlying evidence, performed to express an opinion on whether that information gives a true and fair view or is presented fairly in accordance with a reporting framework.

An engagement in which a practitioner expresses a conclusion designed to enhance the degree of confidence of intended users about the evaluation or measurement of a subject matter against stated criteria.

A high but not absolute level of confidence that the subject matter is free from material misstatement, obtained when audit risk has been reduced to an acceptably low level.

A lower level of confidence than reasonable assurance, normally expressed in a negative form stating that nothing has come to the practitioner's attention suggesting the subject matter is materially misstated.

The risk that the auditor expresses an inappropriate opinion when the financial statements are materially misstated. It is a function of inherent risk, control risk and detection risk.

The susceptibility of an assertion about a class of transactions, account balance or disclosure to a misstatement that could be material before consideration of any related controls.

The risk that a misstatement that could occur in an assertion and that could be material will not be prevented, or detected and corrected on a timely basis, by the entity's internal control.

The risk that the procedures performed by the auditor to reduce audit risk to an acceptably low level will not detect a misstatement that exists and that could be material.

The amount or nature of a misstatement that makes it probable that the economic decisions of users taken on the basis of the financial statements would be changed or influenced.

The amount or amounts set by the auditor at less than materiality for the financial statements as a whole, to reduce to an appropriately low level the probability that uncorrected and undetected misstatements exceed overall materiality.

A difference between the amount, classification, presentation or disclosure reported and what is required for the information to be presented fairly, of a size or nature that could influence users' decisions.

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

An audit opinion that is qualified, adverse or a disclaimer of opinion because of a material misstatement or an inability to obtain sufficient appropriate audit evidence.

A paragraph in the auditor's report drawing users' attention to a matter appropriately presented or disclosed in the financial statements that is fundamental to their understanding, without modifying the opinion.

Those matters that, in the auditor's professional judgement, were of most significance in the audit of the current period, selected from matters communicated with those charged with governance, and described in the auditor's report for listed entities.

The assumption that an entity will continue in operational existence for the foreseeable future, generally at least twelve months from the date the financial statements are approved, without intention or necessity to liquidate.

An attitude of questioning alertness to conditions that may indicate possible misstatement due to error or fraud, and a critical assessment of evidence rather than automatic acceptance of management's explanations.

The application of relevant training, knowledge and experience within the context of auditing, accounting and ethical standards, in making informed decisions about the courses of action appropriate in the engagement.

Evidence that is both enough in quantity and relevant and reliable in quality to support the auditor's conclusions, obtained through risk assessment and further audit procedures.

Representations by management, explicit or otherwise, embodied in the financial statements, about recognition, measurement, presentation and disclosure, which the auditor uses to assess risks and design procedures.

A technique used by the auditor to gather evidence, including inspection, observation, external confirmation, recalculation, re-performance, analytical procedures and inquiry.

Audit procedures designed to detect material misstatements at the assertion level, comprising tests of details of transactions, balances and disclosures, and substantive analytical procedures.

An audit procedure designed to evaluate the operating effectiveness of controls in preventing, or detecting and correcting, material misstatements at the assertion level.

Evaluations of financial information through analysis of plausible relationships among both financial and non-financial data, including comparisons with prior periods, budgets and industry expectations.

The process designed and implemented by those charged with governance, management and other personnel to provide reasonable assurance about the achievement of objectives relating to operations, reporting and compliance.

A control that separates incompatible responsibilities, such as authorising a transaction, recording it and having custody of the related asset, so that no single person can both perpetrate and conceal an error or fraud.

Tracing one or a few transactions through the accounting system from origination to recording in the ledger, used to confirm the auditor's understanding of the system and the design of controls.

The application of audit procedures to fewer than all items within a population so that each sampling unit has a chance of selection, enabling the auditor to draw conclusions about the whole population.

Audit evidence obtained as a direct written response to the auditor from a third party, such as a bank or customer, in paper or electronic form, regarding balances or terms.

An assertion that transactions and events have been recorded in the correct accounting period, tested by examining transactions and documents immediately before and after the period end.

Events occurring between the date of the financial statements and the date of the auditor's report, and facts discovered after that date, which may require adjustment or disclosure.

A written statement by management confirming that it has fulfilled its responsibilities for preparing the financial statements and has provided the auditor with all relevant information and access.

The person or persons responsible for overseeing the strategic direction of the entity and its accountability obligations, such as the board or audit committee, with whom the auditor communicates significant matters.

An intentional act by one or more individuals involving deception to obtain an unjust or illegal advantage, distinguished from error which is unintentional misstatement.

An assurance engagement, typically over historical financial statements, providing limited assurance primarily through inquiry and analytical procedures rather than detailed substantive testing.

A written agreement setting out the agreed terms of the audit, including the objective and scope, responsibilities of management and the auditor, and the expected form of reports.

A circumstance that could compromise the auditor's independence or objectivity, categorised as self-interest, self-review, advocacy, familiarity, intimidation or, for non-assurance work, self-interest and others.

The state of being free from relationships or interests that could compromise, or appear to compromise, the auditor's objectivity and ability to reach conclusions without bias.

A clearly insignificant amount below which misstatements are regarded as immaterial individually or in aggregate, used to avoid accumulating clearly unimportant differences during the audit.