Audit Terms: A Short Glossary
What the wording in the engagement contract and the auditor's report means
Go to the Statutory Audit serviceChecked against the official source:
Auditors' documents are written in professional language, and some wording does not mean what it seems at first reading. Below are the meanings of the terms you will come across most often.
Terms defined by law (Art. 3 of ZRU-677)
- Auditor — an individual holding an auditor's qualification certificate.
- Audit organisation — a commercial organisation that carries out audits and provides related services.
- Register of audit organisations — the list of organisations published on the website of the authorised body.
- Audit committee — a committee of supervisory board members responsible for overseeing financial reporting and selecting the auditor.
- Ranking — ordered lists of audit organisations by performance indicators.
- Audit — an examination of financial statements to establish their reliability (Art. 32).
- Auditor's report — a written opinion on the reliability of the financial statements (Art. 39).
- Knowingly false report — one issued without an audit or inconsistent with the documents; recognised as such by a court (Art. 40).
Core concepts
- Materiality — the size of a misstatement above which it could influence the decisions of users of the financial statements
- Audit sampling — a subset of transactions selected for testing, from which conclusions are drawn about the whole population
- Reasonable assurance — a high but not absolute level of assurance; by its nature an audit does not provide absolute assurance
- Audit risk — the risk that the auditor expresses an inappropriate opinion when the financial statements are materially misstated
- Professional scepticism — critical assessment of the explanations and evidence obtained
Terms used in the auditor's report
- Unmodified opinion — the financial statements are reliable in all material respects
- Qualified opinion — there is a material misstatement or insufficient evidence in a specific area
- Adverse opinion — misstatements are material and pervasive to the financial statements as a whole
- Disclaimer of opinion — the evidence was insufficient to reach a conclusion
- Scope limitation — the auditor was unable to perform the necessary procedures
Working terms
- Management letter — a document listing the deficiencies identified and recommendations; it is not published
- External confirmation — a response from a third party received directly by the auditor
- Substantive procedures — testing of the amounts themselves, as opposed to testing controls
Discuss the audit without the jargon
We will explain in plain language, for your situation, what is needed and to what extent.
Go to the Statutory Audit serviceFrequently asked questions
Is a qualified opinion bad?
It signals a specific problem rather than an overall assessment of the company. The report states exactly what the qualification relates to, and its cause can usually be resolved by the next audit.
Who is an auditor under the law?
An individual holding an auditor's qualification certificate (Art. 3 of ZRU-677).
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