Study Guide

ACC 450

Study Guide - Chapter 1

The Auditing Profession

Fall 2013

1. In your own words, be able to define Auditing, its elements and purpose.

* Auditing: the accumulation and evaluation of evidence about information to determine and report on the degree of correspondence between the information and established criteria. Auditing should be done by a competent, independent person.

* Elements:

*Information- must be in a verifiable form

*Established criteria-some type of standard to evaluate the info (GAAP, IFRS)

*Accumulation and evaluation: there must be enough accumulation of evidence and evaluation depends on the type of info being audited (GAAS, audit procedure)

*Evidence: any information used by the auditor to determine whether the info being audited is stated in accordance with the established criteria

*Competent, independent person: competent=qualified to reach proper conclusion; independent-mind and appearance

*Report on degree of correlation: inform readers on the correlation between info audited and established criteria

* Purpose: to give assurance to financial statement users that the recorded information properly reflects the economic events that occurred during the accounting period

2. Be able to explain or identify the difference between “Accounting” and “Auditing”.

* Accounting: the recording, classifying, and summarizing of economic events in a logical manner for the purpose of providing financial info for decision making; must understand the principles and rules related

* Auditing: focus on determining whether recorded info properly reflects the economic events that occurred during the accounting period; in addition to principles and rules, must possess expertise in the accumulation and interpretation of audit evidence

3. What is information risk and why is it important to third-party users of information?

* Information risk: reflects the possibility that the information upon which the business risk...