AICPA (American Institute of Certified Public Accountants) is the national professional organization for Certified Public Accountants (CPAs) in the United States.  The AICPA’s mission is to provide members with the resources, information, and leadership that enable them to provide valuable services in the highest professional manner to benefit the public, employers, and clients. In fulfilling its mission, the AICPA works with state CPA organizations and gives priority to those areas where public reliance on CPA skills is most significant. To achieve this mission, the AICPA develops standards for audit and other services provided to CPA's; provides educational guidance materials to its members; creates and grades the Uniform CPA Exam; and monitors and enforces compliance with the profession’s audit, technical, and ethical standards. Membership in the AICPA is not required for a CPA, but all CPA's are governed and required to follow the AICPA's guidance under Virginia state law.

SSARS (Statements on Standards for Accounting and Review Services) is defined in the AICPA Professional Standards section as being issued by the “AICPA Accounting and Review Services Committee (ARSC), the senior committee of the AICPA designated to issue pronouncements in connection with the unaudited financial statements or other unaudited financial information of a nonpublic entity.” These “AR-C” interpretation pronouncements are issued to provide CPA’s guidance on the application of SSARS for compilations and review services.

U.S. GAAP (Generally Accepted Accounting Principles) is a technical accounting term that encompasses the conventions, rules, and procedures necessary to define accepted accounting practice at a particular time. The AICPA defines U.S. GAAP as “uniform minimum standards of, and guidelines to, financial accounting and reporting.”

GAAS (Generally Accepted Auditing Standards) as defined by AU-C Section 200 is “specifically, it sets out the overall objectives of the independent auditor (the auditor) and explains the nature and scope of an audit designed to enable the auditor to meet those objectives. It also explains the scope, authority, and structure of GAAS and includes requirements establishing the general responsibilities of the auditor applicable in all audits, including the obligation to comply with GAAS.”

FASB (Financial Accounting Standards Board) is the authority recognized by the SEC, AICPA, & NASBA to promulgate U.S. GAAP in the United States of America.

Attest Service is an engagement that requires independence by the CPA, as defined in AICPA's Professional Standards. Examples of these services include: audits, reviews, and compilations of historical financial statements.

Nonattest Service, in general, is an engagement that does not require independence by the CPA. Examples of these services include: bookkeeping; preparation of financials statements; preparation of tax returns. Note: For a CPA to issue an “independent” accountant’s (auditor’s) report for an audit, review, or compilation, the CPA needs to remain independent with all attest and nonattest services. This will require the CPA and entity to fulfill certain responsibilities for the CPA to remain independent. But, if the CPA is only doing bookkeeping, preparation of tax returns, etc., without the issuance of a report letter and financial statements, the CPA does not need to be independent with these “pure” nonattest services.

Audit (of historical financial statements) is a formalized process designed to obtain reasonable assurance (which is defined as a high level of assurance; but not absolute) that a financial statement(s) is free of material misstatements, whether caused by error, fraud, or direct illegal acts, with respect to the management assertions embodied in a financial statement. AU-C Section 200 mentions “the purpose of an audit is to provide financial statement users with an opinion by the auditor on whether the financial statements are presented fairly, in all material respects, in accordance with an applicable financial reporting framework, which enhances the degree of confidence that intended users can place in the financial statements. An audit in accordance with GAAS and relevant ethical requirements enables the auditor to form that opinion.” The definition of an audit is centered on the presumption that the auditor is starting with the entity’s completed adjusted financial statements.

Review (of historical financial statements) as defined by AICPA Accounting and Review Services (AR-C Section 90) "the objective of the accountant when performing a review of financial statements is to obtain limited assurance as a basis for reporting whether the accountant is aware of any material modifications that should be made to the financial statements for them to be in accordance with the applicable financial reporting framework, primarily through the performance of inquiry and analytical procedures.” “A review differs significantly from an audit of financial statements in which the auditor obtains reasonable assurance, which is a high, but not absolute level of assurance, that the financial statements are free of material misstatement. A review does not contemplate obtaining an understanding of the entity's internal control; assessing fraud risk; testing accounting records by obtaining sufficient appropriate audit evidence through inspection, observation, confirmation, or the examination of source documents; or other procedures ordinarily performed in an audit. Accordingly, in a review, the accountant does not obtain assurance that he or she will become aware of all significant matters that would be disclosed in an audit. Therefore, a review is designed to obtain only limited assurance as a basis for reporting whether the accountant is aware of any material modifications that should be made to the financial statements in order for the statements to be in accordance with the applicable financial reporting framework.”

Compilation (of historical financial statements) as defined by AICPA Accounting and Review Services (AR-C Section 80) “the objective of the accountant in a compilation engagement is to apply accounting and financial reporting expertise to assist management in the presentation of financial statements and report in accordance with this section without undertaking to obtain or provide any assurance that there are no material modifications that should be made to the financial statements in order for them to be in accordance with the applicable financial reporting framework."

Other Accounting Services (OAS) includes: adjustment of the entity’s accounting records to conform to their reporting framework or financial statements; preparation of the financial statements; preparation of the tax return(s); etc. An audit is not any of these services.

Financial Statements including notes is the property and representation of the entity. Only the auditor's report is property and representation of the auditor(s). The entity is responsible for material amounts, grammar and punctuation, and disclosures embodied in the financial statement. Moreover, the auditor can perform OAS to help the entity comply with U.S. GAAP as related to the preparation of the financial statements. AU-C Section 200 mentions that financial statements are “a structured representation of historical financial information, including related notes, intended to communicate an entity’s economic resources and obligations at a point in time or the changes therein for a period of time in accordance with a financial reporting framework.”

Reasonable assurance as defined by AU-C Section 200 is “in the context of an audit of financial statements, a high, but not absolute, level of assurance.”

Historical financial information as defined by AU-C Section 200 is “information expressed in financial terms regarding a particular entity, derived primarily from that entity's accounting system, about economic events occurring in past time periods or about economic conditions or circumstances at points in time in the past.”

Management as defined by AU-C Section 200 is “the person(s) with executive responsibility for the conduct of the entity's operations. For some entities, management includes some or all of those charged with governance; for example, executive members of a governance board or an owner-manager.”

Those charged with governance as defined by AU-C Section 200 is “the person(s) or organization(s) (for example, a corporate trustee) with responsibility for overseeing the strategic direction of the entity and the obligations related to the accountability of the entity. This includes overseeing the financial reporting process. Those charged with governance may include management personnel; for example, executive members of a governance board or an owner-manager.”

Materiality is the magnitude of an omission or misstatement of accounting information that, in light of the surrounding circumstances, makes it probable that the judgment of a reasonable person relying on the information would have been changed or influenced by the omission or misstatement. Materiality is not limited to just amounts. Omitting an ongoing lawsuit or contingency disclosure in financial statements can be material as well.

Misstatement as defined by AU-C Section 200 is “a difference between the amount, classification, presentation, or disclosure of a reported financial statement item and the amount, classification, presentation, or disclosure that is required for the item to be presented fairly in accordance with the applicable financial reporting framework. Misstatements can arise from fraud or error.”

Fraud as defined by AU-C Section 240 is “an intentional act by one or more individuals among management, those charged with governance, employees, or third parties, involving the use of deception that results in a misstatement in financial statements that are the subject of an audit.” Black’s Law Dictionary defines fraud as “any deliberate misrepresentation of the truth or a fact used to take money, rights, or other privilege or property away from a person or persons.”

Fraud risk factors as defined by AU-C Section 240 are “events or conditions that indicate an incentive or pressure to perpetrate fraud, provide an opportunity to commit fraud, or indicate attitudes or rationalizations to justify a fraudulent action.”

Noncompliance with Laws and Regulations (Illegal Acts) as defined by AU-C Section 250 is “acts of omission or commission by the entity, either intentional or unintentional, which are contrary to the prevailing laws or regulations. Such acts include transactions entered into by, or in the name of, the entity or on its behalf by those charged with governance, management, or employees. Noncompliance does not include personal misconduct (unrelated to the business activities of the entity) by those charged with governance, management, or employees of the entity.”

Assertions as defined by AU-C Glossary of Terms are “representations by management, explicit or otherwise, that are embodied in the financial statements as used by the auditor to consider the different types of potential misstatements that may occur.”

Business risk as defined by AU-C Glossary of Terms is “a risk resulting from significant conditions, events, circumstances, actions, or inactions that could adversely affect an entity's ability to achieve its objectives and execute its strategies or from the setting of inappropriate objectives and strategies.”

Internal control as defined by AU-C Glossary of Terms is “a process effected by those charged with governance, management, and other personnel that is designed to provide reasonable assurance about the achievement of the entity's objectives with regard to the reliability of financial reporting, effectiveness and efficiency of operations, and compliance with applicable laws and regulations. Internal control over safeguarding of assets against unauthorized acquisition, use, or disposition may include controls relating to financial reporting and operations objectives. The entity is responsible for establishing and maintaining internal controls, including monitoring ongoing activities; for the selection and application of accounting principles; and for the preparation and fair presentation of the financial statements of financial position, related statements of activities, functional expenses, change in net assets, cash flows, and notes in conformity with U.S. generally accepted accounting principles." The operating effectiveness and efficiency of internal controls is not required to be reported by the auditors, only documented in the audit files.

Relevant assertion as defined by AU-C Glossary of Terms is “a financial statement assertion that has a reasonable possibility of containing a misstatement or misstatements that would cause the financial statements to be materially misstated. The determination of whether an assertion is a relevant assertion is made without regard to the effect of internal controls."

Significant risk as defined by AU-C Glossary of Terms is “an identified and assessed risk of material misstatement that, in the auditor's professional judgment, requires special audit consideration.”

Subsequent Events as defined by FASB ASC 855 is “events or transactions that occur after the balance sheet date but before financial statements are issued or are available to be issued.” There are two types of subsequent events. 1) The first type consists of events or transactions that provide additional evidence about conditions that existed at the date of balance sheet. These events recognized include: debt incurred, reduced, or refinanced; litigation; adoption of employee benefit plans.  2) The second type consists of events that provide evidence about conditions that did not exist at the date of the balance sheet but arouse subsequent to that date. These events not recognized include: business combinations; loss of plant inventories as result of a fire or natural disaster; entering into significant commitments or contingent liabilities.