| Control Deficiency, defined: | Control Deficiency: When the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. |
| Control Design Deficiency, defined: | When a control necessary to meet the control objective is missing, or when the control objective is not always met, even if the control operates as designed. |
| Control Significant Deficiency, defined: | A deficiency (or combination of deficiencies) in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. |
| Control Material Weakness, defined: | A deficiency (or combination of deficiencies) in internal control such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented or detected and corrected on a timely basis. |
| Transaction Cycle, defined: | A transaction cycle is a group of essentially homogeneous transactions, that is, transactions of a particular type. The bulk of a company's economic activities can be grouped into a relative few categories called transaction cycles.
*A transaction cycle is the highest level of aggregation for which control risk may be viewed as a constant.* |
| Define "Kiting" | Kiting occurs when funds are stolen from the. company and, to cover this theft, the employee transfers money from one bank account to. another account right before year-end. |
| Define "Lapping" | Lapping involves withholding current receipts of cash or checks and not recording them. The unrecorded receipt is covered by applying a subsequent receipt to the previously unrecorded account. |
| What are the three (3) types of misstatements? | 1. Factual - concrete evidence to support the facts
2. Judgmental - unreasonable accounting estimate
3. Projected - based off of analytical procedures, sampling |
| Define a Positive Confirmation Request. | Where a response is requested whether or not the other party agrees with the client's recorded amount. |
| Define a Negative Confirmation Request. | Where a response is only requested in the event of disagreement. A nonresponse is viewed as evidence of agreement by the recipient |
| Define, Accounting Estimate? | An approximation of a monetary amount in the absence of a precise means of measurement. |
| Define, Auditor's Point Estimate | The amount (or range of amounts) derived from audit evidence for use in evaluating the recorded or disclosed amount(s). |
| Define, Subsequent Event | Events occurring between the date of the financial statements and the date of the auditor's report. |
| Define, Subsequently Discovered Facts | Facts that become known to the auditor after the date of the auditor's report that, had they been known to the auditor at that date, may have caused the auditor to revise the auditor's report. |
| Define, Projected Misstatements | The amount of known misstatements identified in a sample that is projected to the population from which the sample was drawn. |
| Defined, Supplementary Information | Supplementary Information—“Information presented outside the basic financial statements, excluding required supplementary information that is not considered necessary for the financial statements to be fairly presented in accordance with the applicable financial reporting framework. Such information may be presented in a document containing the audited financial statements or separate from the financial statements.” |
