ACCA

Auditing Dictionary of Terms 本字典中定义的单词均出现在注册会计师（美国）的考试之中，如果您正在参与此项考试，那么您值得一读。The words defined in this dictionary all appeared in questions on the CPA exam, so they are worth knowing if you are studying for the exam. acceptance sampling is sampling to determine whether internal control compliance is greater than or less than the tolerable deviation rate. accounting and review services are official pronouncements covering compilation and review engagements. Compilation is presenting in the form of financial statements information that is the representation of management (owners) without expressing assurance. Review is inquiry and analytical procedures to provide the accountant a basis for expressing limited assurance that there are no material modifications that should be made to the statements for them to be in conformity with U.S. generally accepted accounting principles or, if applicable, another comprehensive basis of accounting. accounting data includes journals, ledgers and other records such as spreadsheets that support financial statements. It may be in computer readable form or on paper. accounting estimate An approximation of a financial statement element. Accounting estimates are often included in historical financial statements because measurement of some amounts is uncertain pending outcome of future events and relevant data about events that have occurred cannot be accumulated on a timely, cost-effective basis. accounting principles are alternative ways of reporting and disclosing information in financial statements and related footnotes. accounts receivable Debts due from customers from sales of products and services. Normally a current asset. adjusting entries are accounting entries made at the end of an accounting period to allocate items between accounting periods. adverse An audit opinion that the financial statements as a whole are not presented in conformity with U.S. GAAP. advisory services are a consulting service in which the CPA develops the findings, conclusions, and recommendations presented for client consideration and decision making. This differs from attestation services where the CPA expresses a conclusion about reliability of a written assertion that is the responsibility of another. aggregate (aggregated) Constituting the whole. Aggregate expenses include expenses of all divisions combined for the entire year. agreed-upon procedures An engagement where the client specifies procedures and the accountant agrees to perform those procedures. An accountant may accept an engagement limited to applying agreed-upon procedures to financial statement elements, where the scope of the engagement is not sufficient to express an opinion on the elements, if the users assume responsibility for sufficiency of the procedures, and use of the report is restricted to specified users. aicpa American Institute of Certified Public Accountants. The professional organization of CPAs in the U.S. It is a private organization of CPAs, not an arm of the government. Each state issues CPA certificates, not the AICPA. Since each state makes its own laws, each state could prepare and grade their own CPA examination. However, each state uses the uniform CPA exam prepared and graded by the AICPA. allocation Distribution according to a plan. Depreciation, amortization, and depletion are methods to allocate a cost to periods benefited. allowance for doubtful accounts A contra asset account with a credit balance used to reduce the carrying amount of accounts receivable to net realizable value. The allowance balance is the estimated total of uncollectible accounts included in accounts receivable. allowance for sampling risk The difference between a sample estimate and the projected population characteristic at a specified sampling risk. This allowance is also the difference between the expected error rate and the tolerable deviation rate. analytical procedure A comparison of financial statement amounts with the auditor's expectation. An example is the comparison of actual interest expense for the year (a financial statement amount) with an estimate of what that interest expense should be. The estimate can be found by multiplying a reasonable interest rate times the average balance of interest bearing debt outstanding during the year (the auditor's expectation). If actual interest expense differs significantly from the expectation the auditor explains the difference in the working papers. analyze Identify and classify items for further study. anticipated Expected. application control Programmed procedure in application software designed to ensure completeness and accuracy of information. approve To authorize. A manager authorizes a transaction by signing a voucher providing approval for the disbursement. ascertain An audit procedure to determine or to discover with certainty. For example, to ascertain the date on which an investment was purchased by examining source documents. assertion Management asserts financial statements are correct with regard to existence or occurrence of assets, liabilities or transactions, completeness of information in the financial statements, rights and obligations at a point in time, appropriate valuation or allocation, presentation, and disclosure. assess To determine the value, significance, or extent of. assessed Determined. The level of control risk determined by the auditor, based on tests of controls, is the assessed level of control risk. assurance The level of confidence one has in a proposition. attest (attestation) report An attest engagement is one in which a practitioner is engaged to issue a written conclusion about the reliability of a written assertion that is the responsibility of another party. A financial statement audit is one type of attestation. attorney's letter is signed by the client's lawyer and addressed to the auditor. It is the auditor's primary means to corroborate information furnished by management about litigation, claims, and assessments. attribute sampling The characteristic tested is a property that has only two possible values (an error exists or it does not). audit adjustment, whether or not recorded by the entity, is a proposed correction of the financial statements that may not have been detected except through audit procedures. audit committee A committee of the board of directors responsible for oversight of the financial reporting process, selection of the independent auditor, and receipt of audit results. audit objective In obtaining evidence in support of financial statement assertions, the auditor develops specific audit objectives in the light of those assertions. For example, an audit objective related to the completeness assertion an auditor might develop for inventory balances is that inventory quantities include all products, materials, and supplies on hand. audit planning is developing an overall strategy for the conduct and scope of the audit. The nature, extent, and timing of planning varies with the size and complexity of the entity, experience with the entity, and knowledge of the entity's business. audit risk A combination of the risk that material errors will occur in the accounting process and the risk the errors will not be discovered by audit tests. Audit risk includes uncertainties due to sampling (sampling risk) and to other factors (nonsampling risk). auditing standards board Statements on Auditing Standards are issued by the auditing standards board, the senior technical body of the AICPA designated to issue auditing pronouncements. authorize (authorization) To give permission for. A manager authorizes a transaction by signing a voucher providing authorization for the disbursement. backup A copy of a computer program or file stored separately from the original. batch A set of computer data or jobs to be processed in a single program run. benford's law is a mathematical law that applies to any population of numbers derived from other numbers (such as the dollar amount of a sale, found by multiplying the quantity sold times the unit price). It holds that 30% of the time the first non-zero digit of this derived number will be one, and it will be a nine only 4.6% of the time. Benford's law is used by auditors to identify fictitious populations of numbers. bill of lading A document issued by a carrier to a shipper, listing and acknowledging receipt of goods for transport and specifying terms of delivery. blind trust A financial arrangement in which a person avoids possible conflict of interest by transferring financial affairs to a fiduciary who has sole asset management discretion. The person establishing the trust also gives up the right to information regarding the assets. cancel supporting documents To mark supporting documents as having been used to support a transaction so the same documents can't be used as support for a second transaction. An example is stamping vouchers "paid" and marking them with the check number. capitalized Recorded as an asset. A capitalized lease is in substance a purchase to the lessee. An asset is recorded equal to the present value of the lease payments, which is also recorded as a liability. Payments, partly interest and partly principal, are made on the lease liability. The lease asset is depreciated by the lessee as though it were legally owned by the lessee. caveat A warning or caution. check digit A redundant digit added to a code to check accuracy of other characters in the code. check register A listing of checks issued, normally in numeric sequence and in order by date issued. classification Arrangement or grouping. Assets and liabilities are normally classified as current or noncurrent. collateralize To pledge property as security (collateral) for a debt. collusion A secret agreement between two or more parties for fraud or deceit. comfort letter A letter written by the auditor to an underwriter of securities, which expresses an opinion about whether the audited financial statements and schedules in the registration statement comply as to form with applicable accounting requirements of the Act and related rules and regulations adopted by the SEC. The procedures to be performed are specified by the underwriter. comparability Users evaluate accounting information by comparison. Similar companies account for similar transactions in similar ways. Another goal is comparison of one company's information from one period to the next (consistency). Operating trends should not be disguised by changing accounting methods. comparative Financial statements of a prior period shown with those of the current period to aid in comparisons between periods. compare (comparison) An audit procedure. The auditor observes similarities and differences among similar items such as an account from one year to the next. compensating balance An offsetting balance. A requirement by some banks that a borrower maintain a minimum balance in a checking or savings account as a condition of granting a loan. The offsetting balance increases the effective interest rate to the bank since the net amount loaned is reduced but the interest paid is unchanged. competence of an internal audit staff is a function of qualifications, including education, certification, and supervision. Competent audit evidence is valid and reliable compile (compilation) A compilation is presenting in the form of financial statements information that is the representation of management without expressing assurance. Compilation of a financial projection is assembling prospective statements based on assumptions of a responsible party, reading the statements, considering appropriateness of presentation, and issuing a compilation report. No assurance is provided on the statements or underlying assumptions. The accountant need not be independent. completeness Assertions about completeness deal with whether all transactions and accounts that should be presented in the financial statements are included. For example, management asserts that all purchases of goods and services are recorded and included in the financial statements. Similarly, management asserts that notes payable in the balance sheet include all such obligations of the entity. compliance Following applicable rules or laws. comprehensive basis of accounting A complete set of rules other than U.S. GAAP applied to all items in a set of financial statements. Examples include a basis of accounting required by a regulatory agency, a basis of accounting the entity uses for its income tax return and the cash receipts and disbursements basis. computer controls Internal controls performed by computer (software controls) as opposed to manual controls. Also means general and application controls over the computer processing of data. condensed financial statements are presented in considerably less detail than complete financial statements. confirm (confirmation) Communication with outside parties to authenticate internal evidence. consignment Transfer of possession but not title to goods. Title stays with the consignor, while the consignee has possession. consistency To achieve comparability of information over time, the same accounting methods must be followed. If accounting methods are changed from period to period, the effects must be disclosed. consulted Sought advice or information. consulting services performed by CPAs include consultations, advisory services, implementation services, product services, transaction services, and staff and support services. contingency is an existing condition involving uncertainty as to possible gain (gain contingency) or loss (loss contingency) that will be resolved by future events. Estimates, such as the useful life of an asset, are not contingencies. Eventual expiration of the asset's utility is not uncertain. continuing auditor is the auditor of the current year who also audited the financial statements of the client for the previous year. continuing accounting significance Matters of continuing accounting significance are those normally included in the permanent audit working paper file, such as the analysis of balance sheet accounts, and those relating to contingencies. Such information from a prior year is used by the auditor in the current year's audit and is updated each year. control A policy or procedure that is part of internal control. control environment is the attitude, awareness, and actions of the board, management, owners, and others about the importance of control. This includes integrity and ethical rules, commitment to competence, board or audit committee participation, organizational structure, assignment of authority and responsibility, and human resource policies and practices. control policies and procedures Control activities are the policies and procedures that help ensure management directives are carried out. Those pertinent to an audit include performance reviews, information processing, physical controls and segregation of duties. control risk The risk that material error in a balance or transaction class will not be prevented or detected on a timely basis by internal controls. controller An officer who supervises financial affairs of an entity. In internal control the controller is often the person with recordkeeping (general ledger) responsibilities, as contrasted with asset custody, management decision making, and internal audit functions. corroborate (corroborating) (corroboration) (corroborative) To strengthen with other evidence, to make more certain. count Enumerate some characteristic such as the number of items in inventory. cumulative effect of changing to a new accounting principle is the effect on retained earnings at the beginning of the current period. It is included in net income after extraordinary items. Only the direct effect (net of income tax effect) is considered. current ratio Total current assets divided by total current liabilities. custodian One that has possession or is in charge of something. Some entities entrust marketable investment securities to a bank which is custodian of the company's securities. custody Possession. cutoff Designating a point of termination. An auditor uses tests of cutoff to obtain evidence that transactions for each year are included in the financial statements of the appropriate year. defalcation To misuse or embezzle funds. deficiency An internal control shortcoming or opportunity to strengthen internal controls. detection risk The risk audit procedures will lead to a conclusion that material error does not exist when in fact such error does exist. detective control A control designed to discover an unintended event or result. deviation Departure from prescribed internal control. Often expressed as a rate at which the departure occurs. disclaimer (disclaim) A statement that the auditor is unable to express an opinion as to the presentation of financial statements in conformity with U.S. GAAP. disclosure Revealing information. Financial statement footnotes are one way of providing necessary disclosures. discovery sampling Acceptance sampling (sampling to determine whether internal control compliance is greater than or less than the tolerable deviation rate) when expected attribute occurrence rate is zero. document (documentary) (documentation) Written or printed paper that bears information that can be used to furnish decisive evidence. Could also be a recording, computer readable information, or a photograph. dual date If a major event comes to the auditor's attention between the report date and issuance of the report, the financial statements may include the event as an adjustment or disclosure. The auditor dual dates the audit report (as of the end of fieldwork, except footnote XX, which is dated later). dual-purpose test Audit procedures are classified as substantive tests or tests of controls. If a procedure provides both types of evidence it is a dual-purpose test. edi “Electronic Data Interchange” is the use of communication between an entity and customers or suppliers to transact business electronically. Purchase, shipping, billing, cash receipt, and cash disbursements can be completed entirely by exchanging electronic messages. edit check Reasonableness, validity, limit, and completeness tests that are programmed routines designed to check input data and processing results for completeness, accuracy and reasonableness. edp “Electronic Data Processing”. Processing of information by computer as opposed to handwritten records. effective income tax rate The income tax provision (expense) shown on an income statement divided by the pretax income. This differs from the statutory rate because of deductions, credits, and exclusions. effective internal control Reasonable assurance that the entity’s operational objectives are achieved, that published financial statements are reliably prepared, and applicable laws and regulations are complied with. effectiveness Producing a desired outcome. An audit procedure is effective if the evidence supports a correct conclusion. efficiency The ratio of the audit evidence produced to audit resources used. embedded control performance deals with unexpected changes to data. embezzlement To take assets in violation of trust. encryption is scrambling data so it is meaningless to anyone but the intended recipient, who has the key to unscramble the data. engagement letter A letter that represents the understanding about the engagement between the client and the CPA. The letter identifies the financial statements and describes the nature of procedures to be performed. It includes an explanation of the objectives of the procedures, an explanation that the financial information is the responsibility of the company's management, and a description of the form of report. environment The control environment is the attitude, awareness, and actions