Auditing is the process of examining financial records, accounts, and business transactions to ensure accuracy, compliance with laws and regulations, and prevention/detection of fraud.

The main types of audits are external audits (performed by independent, external auditors), internal audits (performed by employees of the organization), and information systems audits (focused on IT systems and data integrity).

GAAS are the guidelines and principles that auditors must follow when conducting audits of financial statements. They cover areas like auditor qualifications, planning, evidence, reporting, and ethical conduct.

Assurance services aim to improve the quality and credibility of information for decision makers by providing an independent assessment and opinion on whether the subject matter conforms with stated criteria.

Key components include a control environment, risk assessment, control activities, information and communication, and monitoring activities. These help safeguard assets and ensure reliable financial reporting.

Preventive controls aim to prevent errors or fraud from occurring in the first place, while detective controls are designed to identify and report errors or fraud after they have occurred.

The fraud triangle refers to the three factors that increase the risk of fraud: incentive/pressure, opportunity, and rationalization/attitude. Auditors examine these factors to assess fraud risk.

Confirmatory evidence is audit evidence obtained directly from an independent third-party source outside the client. It is considered highly reliable evidence.

Audit planning involves developing an overall strategy and detailed approach for the expected nature, timing, and extent of the audit. It helps ensure the audit is conducted effectively.

Substantive procedures are audit tests and procedures performed to detect material misstatements in account balances and financial data. They include tests of details and substantive analytical procedures.

Materiality refers to the significance of an item's potential omission or misstatement in relation to the overall financial statements. Auditors use materiality to assess audit risk and determine the scope of testing.

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, and the form of reports to be issued.

An audit opinion is the auditor's conclusion on the financial statements, while an auditor's report is the overall document that contains the audit opinion as well as other key elements like responsibilities and findings.

The types of audit opinions are unqualified/unmodified (clean), qualified, adverse, and disclaimer of opinion. The type depends on the auditor's assessment of the fairness of the financial statements.

The going concern assumption is that the entity will continue operating into the foreseeable future with no intention or need to liquidate. Auditors assess whether there are events/conditions that challenge this assumption.

Audit documentation provides the principal support for the auditor's report, including evidence obtained and conclusions reached. It helps record procedures performed, results, and reasoning behind significant matters.

Ratio analysis involves calculating and analyzing key financial ratios to identify unusual fluctuations or trends that may indicate potential misstatements or risk areas requiring further audit attention.

IT audit procedures include testing general IT controls, application controls, data integrity, system security, disaster recovery plans, and reviewing system-generated reports or data extracts.

Communicating with those charged with governance (e.g. board of directors) helps ensure a two-way dialogue on significant audit matters, promote effective oversight, and obtain relevant information.

Internal auditors are employees of the organization who provide independent assurance and consulting services. External auditors are independent third parties hired to audit the organization's financial statements.

Inquiries involve seeking relevant information from knowledgeable individuals, while analytics refer to evaluating data using analysis and ratios. These help identify unusual items, risks, and corroborate other evidence.

Tests of controls assess the operating effectiveness of controls over a period of time. Substantive tests detect material misstatements through procedures like detailed testing and analytics on account balances.

Management representations are formal written statements by management reaffirming certain matters related to the financial statements and internal controls. They provide audit evidence on specific matters.

Common audit procedures for related party transactions include examining source documents, evaluating accounting treatment, reviewing terms and approval processes, and assessing collectability of receivables or indicators of fraud.

A compliance audit focuses on assessing whether an entity has complied with relevant laws, regulations, policies, contracts, and other requirements that could have a direct and material impact on operations or reporting.

An ICFR audit evaluates the effectiveness of an organization's internal controls over financial reporting, which helps ensure reliable financial statements and effective operations.

Management is responsible for establishing controls to prevent and detect fraud. The auditor is responsible for planning and performing the audit with professional skepticism, identifying fraud risks, and responding appropriately.

Audit sampling involves applying audit procedures to less than 100% of a population to evaluate a characteristic of the full population. It is used when it would be inefficient or impractical to test the entire population.

Common reports for special engagements include reports on compliance, internal controls, pro forma financial info, applying agreed-upon procedures, and certifications/attestation reports.

Key components of audit risk models include inherent risk (risk before controls), control risk (risk controls fail), and detection risk (risk procedures fail to detect misstatements). Auditors assess each component.

Reasonable assurance is a high, but not absolute, level of assurance that financial statements are free of material misstatement. Absolute assurance is impractical due to limitations like judgments, use of sampling, and persuasive vs conclusive evidence.

An emphasis of matter paragraph highlights a matter that is fundamental to users' understanding of the financial statements. It is used when there is significant uncertainty or an unusually important issue.

Common procedures include confirming investment holdings, reviewing investment income calculations, evaluating valuations and fair value estimates, testing purchases and sales transactions, and assessing controls over investments.

An engagement quality control review is an objective evaluation of the significant judgments made and conclusions reached by the audit team. It provides an additional level of assurance on the audit.

Audit evidence refers to the information and data collected and evaluated during the audit to support the audit conclusions. Audit findings are the actual issues, deficiencies, or conclusions reached based on analyzing the evidence.

Professional skepticism refers to an attitude of questioning and critically assessing audit evidence rather than blindly accepting representations. It is essential for gathering sufficient, appropriate evidence.

The auditor is responsible for performing procedures to identify events after the balance sheet date but before the audit report date which may require adjustment or disclosure in the financial statements.

Common challenges include time/resource constraints, evaluating complex estimates and judgments, working with incomplete data, assessing fraud risk, addressing new accounting or auditing standards, and keeping up with technological changes.

In a group audit, the principal auditor is responsible for issuing the audit report on the group financial statements. They also coordinate the work of other auditors of components (subsidiaries, divisions, etc.).

Audit quality refers to the likelihood that the auditor will both identify and report material misstatements in the financial statements. It hinges on factors like competence, independence, resources, due care, and relevant standards.

Key ethical principles for auditors include integrity, objectivity, professional competence, due care, confidentiality, and professional behavior. These are covered in professional codes of conduct.

CAATs refer to the use of computer programs and data analytics tools to automate audit procedures and testing. They improve efficiency, allow comprehensive transaction testing, and enable more advanced analytical procedures.

Audit risk refers to the risk that an auditor expresses an inappropriate opinion due to material misstatements. Business risk is the risk of loss from operations, events, or circumstances affecting an entity's profitability or ability to achieve objectives.

Key factors in assessing control risk include understanding relevant controls, evaluating control design, testing operating effectiveness through sampling, identifying control deficiencies, and assessing risk that material misstatements won't be prevented/detected.

Potential indicators of management bias include aggressive accounting policies, tendency to accrue or defer costs to meet targets, overriding internal controls, unwillingness to correct misstatements, and frequent disputes with the auditor.

The exit meeting at the end of an audit allows the auditors to discuss and communicate findings, conclusions, and recommendations to management in a formal setting before finalizing the report.

An integrated audit combines the audit of internal control over financial reporting with the audit of the financial statements. A non-integrated audit treats the two as separate engagements.