ACC450_Exam 1_StudyGuide

ACC450_Exam 1_StudyGuide - ACC 450 Study Guide - Chapter 1...

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ACC 450 Study Guide - Chapter 1 Fall 2011 1. In your own words, be able to define Auditing, its elements and purpose. a. 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. b. Components of an Audit: b.i. Information and Established Criteria – information in a verifiable form and some standards (criteria) by which the auditor can evaluate the information. b.ii. Accumulating and Evaluating Evidence – any information used by the auditor to determine whether the information being audited is stated in accordance with the established criteria. Evidence takes many forms: Electronic and documentary data about transactions, written and electronic communication with outsiders, observations by the auditor, and oral testimony of the auditee (client). b.iii. Competent, Independent Person – the auditor must be qualified to understand the criteria used and must be competent to know the types and amount of evidence to accumulate to reach the proper conclusions after examining the evidence. The auditor must also have an independent mental attitude. b.iv. Reporting – the final stage of the audit process is preparing the audit report, which communicates the auditor’s findings to users. Reports differ in nature, but all must inform readers of the degree of correspondence between the information audited and established criteria. 2. Be able to explain or identify the difference between “Accounting” and “Auditing”. a. Accounting – follow a set of criteria. Recording, classifying, and summarizing of economic events in a logical manner for the purpose of providing financial information for decision making. Prepare the Financial Statements b. Auditing – verify info meets standards. (see above definition) 3. What is information risk and why is it important to third-party users of information? a. Information Risk – reflects the possibility that the information upon which the business risk decision was made was inaccurate. A likely cause of the information risk is the possibility of inaccurate financial statements. 4. Be able to identify an example of information risk. a. Examples Include: Remoteness of Information, Biases and Motives of the Provider, Voluminous Data, Complex Exchange Transactions, User Verifies Information, User Shares Information Risk w/ Management, and Audited Financial Statements are Provided. 5. Be able to draw and explain the diagram that demonstrates the difference between assurance and non-assurance services and how audit and attestation services relate to assurance services. a.
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This note was uploaded on 02/07/2012 for the course ACC 450 taught by Professor Giles during the Fall '08 term at N.C. State.

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ACC450_Exam 1_StudyGuide - ACC 450 Study Guide - Chapter 1...

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