CA Inter Auditing and Ethics flashcards

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

Reasonable assurance

A high but not absolute level of assurance that the auditor provides when expressing an opinion on financial statements; it reflects inherent limitations of audit.

Professional skepticism

An attitude of questioning mind, alertness to contradictory evidence, and critical assessment of audit evidence, without assuming management is dishonest.

Audit scope

The boundaries of an audit set by applicable law, engagement terms, and Standards on Auditing, including entity components, periods, and reporting requirements covered.

Audit strategy

The overall approach setting scope, timing, and direction of an audit, guiding development of a more detailed audit plan.

Audit plan

A detailed description of nature, timing, and extent of audit procedures, including risk assessment and further audit procedures, updated as the audit progresses.

Performance materiality

Amount or amounts set below overall materiality to reduce to an appropriately low level the probability that aggregate uncorrected and undetected misstatements exceed overall materiality.

Audit risk model

Audit risk equals inherent risk times control risk times detection risk; detection risk is managed through nature, timing, and extent of audit procedures.

Significant risk

An identified risk of material misstatement that, in the auditor's judgment, requires special audit consideration because of its nature or magnitude.

Test of controls

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

Sufficient appropriate evidence

Evidence that is sufficient in quantity and appropriate in relevance and reliability to support the audit opinion; sufficiency and appropriateness are interrelated.

Positive confirmation

A request that the confirming party respond directly to the auditor, stating whether it agrees or disagrees with the stated information.

Analytical procedures

Evaluations of financial information through analysis of plausible relationships among financial and non-financial data, including comparisons, ratios, and trend analysis.

Cut-off testing

Testing whether transactions are recorded in the correct accounting period, often by examining transactions and documents immediately before and after the year-end.

Inventory NRV test

Comparing inventory cost with net realizable value, being estimated selling price less costs to complete and sell, to identify required write-downs.

Search unrecorded liabilities

Procedures after year-end, such as reviewing payments, invoices, and statements, to identify liabilities that existed at year-end but were not recorded.

Audit file assembly

The process of completing the audit file on a timely basis after the auditor's report date, normally within 60 days under SA 230.

Permanent audit file

Working papers containing information of continuing importance across audits, such as constitutional documents, agreements, accounting policies, and organizational structure.

Subsequent events period

The period from the date of financial statements to the date of the auditor's report, during which the auditor considers events requiring adjustment or disclosure.

Written representations

Written statements from management confirming responsibilities and matters material to the financial statements, obtained near the report date and not a substitute for other evidence.

Engagement quality control review

An objective evaluation before the report is issued of significant judgments and conclusions of the engagement team, required in specified circumstances such as listed entity audits.

Modified opinion

A qualified opinion, adverse opinion, or disclaimer of opinion, issued when the financial statements are materially misstated or sufficient appropriate evidence cannot be obtained.

Key audit matters

Matters of most significance in the audit of current-period financial statements, selected from communications with those charged with governance, described in the auditor's report for listed entities.

Emphasis of Matter

A separate section in the auditor's report drawing attention to a matter appropriately presented or disclosed, which is fundamental to users' understanding but does not modify the opinion.

Cooperative society audit

Audit under applicable cooperative societies law, covering members' funds, compliance, and financial statements; eligibility and appointment of auditors are governed by that law.

Foreign contribution audit

Audit of foreign contributions received by eligible organizations, checking registration, designated bank account, purpose restrictions, and compliance with foreign contribution law.

PSU performance audit

An evaluation of economy, efficiency, and effectiveness of government or public-sector programs and activities, often conducted under the mandate of the Comptroller and Auditor General.

Non-performing asset

A bank loan or advance that ceases to generate income for the bank because principal or interest has remained overdue for more than 90 days, subject to RBI norms.

Long Form Audit Report

A detailed report by bank statutory auditors covering areas such as advances, deposits, investments, reconciliation, and internal controls, submitted with the main audit report.

Substandard asset

An NPA classified as substandard when it has remained non-performing for a period up to 12 months, with stricter provisioning than a standard asset.

Self-interest threat

A threat to independence or objectivity arising from financial or other interests, such as a direct financial interest in the client or excessive dependence on fees.

Contingent audit fee

An audit fee calculated based on the outcome or findings of the audit; it is prohibited because it creates self-interest and advocacy threats to independence.

Engagement letter

A written agreement setting out the agreed scope, responsibilities, applicable financial reporting framework, and terms of an audit engagement before it begins.