AUDITING

Introduction
Lecture # 1

Definition
Access controls refer the Procedures designed to restrict access to on-line terminal devices, programs and
data. Access controls consist of “user authentication” and “user authorization.” “User authentication”
typically attempts to identify a user through unique logon identifications, passwords, access cards or
biometric data.

Accounting estimate means an approximation of the amount of an item in the absence of a precise means of
measurement.

Accounting records—Generally include the records of initial entries and supporting records, such as checks
and records of electronic fund transfers, invoices, contracts, the general and subsidiary ledgers, journal
entries, work sheets and spreadsheets supporting cost allocations, computations, reconciliations and
disclosures.

Agreed-upon procedures engagement—an engagement in which an auditor is engaged to carry out those
procedures of an audit nature to which the auditor and the entity and any appropriate third parties have
agreed and to report on factual findings.

Analytical procedures—Evaluations of financial information made by a study of plausible relationships

among both financial and non-financial data. Analytical procedures also encompass the investigation of
identified fluctuations and relationships that are inconsistent with other relevant information or deviate
significantly from predicted amounts.

Annual report—A document issued by an entity, ordinarily on an annual basis, which includes its financial
statements together with the auditor’s report thereon.

Applicable financial reporting framework—the financial reporting framework adopted by management in

preparing the financial statements that the auditor has determined is acceptable in view of the nature of the
entity and the objective of the financial statements, or that is required by law or regulations.

Appropriateness—The measure of the quality of evidence, that is, its relevance and reliability in providing
support for, or detecting misstatements in, the classes of transactions, account balances, and disclosures.

Assertions—Representations by management, explicit or otherwise, that are embodied in the financial

statements.

Assistants—Personnel involved in an individual audit other than the auditor.

Assurance engagement—an engagement in which a practitioner expresses a conclusion designed to

enhance the degree of confidence of the intended users other than the responsible party about the outcome of
the evaluation or measurement of a subject matter against criteria.

Reasonable assurance engagement—the objective of a reasonable assurance engagement is a reduction in

assurance engagement risk to an acceptably low level in the circumstances of the engagement as the basis for
a positive form of expression of the practitioner’s conclusion.
Md. Mokhlesur Rahman Mozid, ACMA
Limited assurance engagement—the objective of a limited assurance engagement is a reduction in
assurance engagement risk to a level that is acceptable in the circumstances of the engagement, but where
that risk is greater than for a reasonable assurance engagement, as the basis for a negative form of expression
of the practitioner’s conclusion.

Assurance engagement risk—the risk that the practitioner expresses an inappropriate conclusion when the
subject matter information is materially misstated.

Audit documentation—the record of audit procedures performed, relevant audit evidence obtained, and
conclusions the auditor reached.

Audit evidence—all of the information used by the auditor in arriving at the conclusions on which the audit
opinion is based. Audit evidence includes the information contained in the accounting records underlying the
financial statements and other information.

Audit of financial statements—the objective of an audit of financial statements is to enable the auditor to
express an opinion whether the financial statements are prepared, in all material respects, in accordance with
an applicable financial reporting framework.

Audit risk—Audit risk is the risk that the auditor expresses an inappropriate audit opinion when the
financial statements are materially misstated.

Audit sampling—The application of audit procedures to less than 100% of items within an account balance
or class of transactions such that all sampling units have a chance of selection.

Anomalous error — an error that arises from an isolated event that has not recurred other than on
specifically identifiable occasions.

Non-sampling risk—Arises from factors that cause the auditor to reach an erroneous conclusion for any
reason not related to the size of the sample.

Population—the entire set of data from which a sample is selected and about which the auditor wishes to
draw conclusions.

Tolerable error—The maximum error in a population that the auditor is willing to accept.

Auditor—The engagement partner. The term “auditor” is used to describe either the engagement partner or
the audit firm.

Existing auditor—The auditor of the financial statements of the current period.

External auditor— The person/firm who performing the external audit. Where appropriate the term
“external auditor” is used to distinguish the external auditor from an internal auditor.

Incoming auditor—The auditor of the financial statements of the current period, where either the financial
statements of the prior period have been audited by another auditor, or the audit is an initial audit
engagement.
Internal auditor—A person performing an internal audit.

Md. Mokhlesur Rahman Mozid, ACMA

Principal auditor—the auditor with responsibility for reporting on the financial statements of an entity
when those financial statements include financial information of one or more components audited by another
auditor.

Other auditor—an auditor, other than the principal auditor, with responsibility for reporting on the financial
information of a component, which is included in the financial statements audited by the principal auditor.

Predecessor auditor—The auditor who was previously the auditor of an entity and who has been replaced
by an incoming auditor.

Engagement partner—The partner or other person in the firm who is responsible for the engagement and
its performance, and for the report that is issued on behalf of the firm, and who, where required, has the
appropriate authority from a professional, legal or regulatory body.

Engagement letter—An engagement letter documents and confirms the auditor’s acceptance of the
appointment, the objective and scope of the audit, the extent of the auditor’s responsibilities to the client and
the form of any reports.

Engagement team—All personnel performing an engagement, including any experts contracted by the firm
in connection with that engagement.

Intended users—The person, persons or class of persons for whom the practitioner prepares the assurance
report. The responsible party can be one of the intended users, but not the only one.

Limitation on scope—A limitation on the scope of the auditor’s work may sometimes be imposed by the
entity (for example, when the terms of the engagement specify that the auditor will not carry out an audit
procedure that the auditor believes is necessary).

Management representations—Representations made by management to the auditor during the course of

an audit, either unsolicited or in response to specific inquiries.

Materiality—Information is material if its omission or misstatement could influence the economic decisions
of users taken on the basis of the financial statements.

Misstatement—A misstatement of the financial statements that can arise from fraud or error (also see Fraud
and Error).

Opinion—The auditor’s report contains a clear written expression of opinion on the financial statements. An
unqualified opinion is expressed when the auditor concludes that the financial statements give a true and fair
view or are presented fairly, in all material respects, in accordance with the applicable financial reporting
framework. (also see Modified auditor’s report)

Professional skepticism—An attitude that includes a questioning mind and a critical assessment of
evidence.

Md. Mokhlesur Rahman Mozid, ACMA