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Adverse opinion
An adverse opinion should be expressed when the auditor believes that
the financial statements taken as a whole are not presented fairly in
conformity with GAAP or when the auditor believes that the clients
internal controls are not effective.
American Institute of Certified Public Accountants (AICPA)
The primary professional organization for CPAs, it has a number of
committees to develop professional standards for the conduct of
nonpublic company audits and other services performed by its
members and to self-regulate the profession.
Audit quality
Performing an audit in accordance with generally accepted auditing
standards (GAAS) to provide reasonable assurance that the audited
financial statements and related disclosures are presented in
accordance with GAAP and providing assurance that those financial
statements are not materially misstated whether due to errors or
fraud.
Center for Audit Quality (CAQ)
An organization affiliated with the AICPA that is dedicated to enhancing
investor confidence and trust in the financial markets.
Committee
of
Sponsoring
Organizations
of
the
Treadway
Commission (COSO)
An organization that provides thought leadership and guidance on
enterprise risk management, internal control and fraud deterrence.
Concurring partner review
Occurs when an audit partner not otherwise involved in the audit
independently reviews each audit to make sure that documented
evidence supports the audit opinion. Otherwise known as an
engagement quality review.
Due professional care
A standard of care expected to be demonstrated by a competent
professional in his or her field of expertise, set by the generally
accepted auditing standards but supplemented in specific
implementation instances by the standard of care expected by a
reasonably prudent auditor.
Engagement letter
States the scope of the work to be done on the audit so that there can
be no doubt in the mind of the client, external auditor, or the court
system as to the expectations agreed to by the external auditor and
the client.
Engagement quality review

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Occurs when an audit partner not otherwise involved in the audit
independently reviews each audit to make sure that documented
evidence supports the audit opinion. Otherwise known as a concurring
partner review.

Financial statement audit

A systematic process of objectively obtaining evidence regarding
assertions about economic actions and events to ascertain the degree
of correspondence between those assertions and established criteria
and communicating the results to interested users.
Generally accepted accounting principles (GAAP)
GAAP refers to generally accepted accounting principles for financial
reporting. Throughout the text we recognize that the criteria may be
developed by either FASB or the IASB. GAAP has general acceptance
and provides criteria by which to assess the fairness of a financial
statement presentation.
Generally accepted auditing standards (GAAS)
GAAS refers to professional external auditing standards that are
followed by auditors when conducting a financial statement audit.
Throughout the text, when we refer to professional external auditing
standards, we will use the term GAAS (generally accepted auditing
standards). We recognize that GAAS are set by several bodies,
including the AICPA, the IAASB, and the PCAOB.
Integrated audit
Type of audit provided when an external auditor is engaged to perform
an audit of the effectiveness of internal control over financial reporting
(the audit of internal control over financial reporting) that is
integrated with an audit of the financial statements.
International Accounting Standards Board (IASB)
This organization issues IFRS (International Financial Reporting
Standards) and is working to be the one provider of accounting
standards around the world.
International Auditing and Assurance Standards Board (IAASB)
A part of the International Federation of Accountants that is responsible
for issuing auditing and assurance standards. Its goal is to harmonize
auditing standards on a global basis.
International Standards for Auditing (ISAs)
Standards issued by the IAASB for all auditors who are following
international auditing standards.
Interoffice review

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A review of one office of the audit firm by professionals from another
office to assure that the policies and procedures established by the
firm are being followed.
Professional skepticism
An attitude that includes a questioning mind and critical assessment of
audit evidence.
Public Company Accounting Oversight Board (PCAOB)
A quasipublic board, appointed by the SEC, to provide oversight of the
firms that audit public companies registered with the SEC. It has the
authority to set auditing standards for the audits of public companies.
Sarbanes-Oxley Act of 2002
Broad legislation mandating new standard setting for audits of public
companies and new standards for corporate governance.
Securities and Exchange Commission (SEC)
The governmental body with the oversight responsibility to ensure the
proper and efficient operation of capital markets in the United States.
Unqualified audit report
The standard three-paragraph audit report that describes the auditors
work and communicates the auditors opinion that the financial
statements are fairly presented in accordance with GAAP.