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65 Cards in this Set
- Front
- Back
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Approved Vendor List
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A record of vendors that have been vetted to ensure that vendors meet company policy and procedure in terms of price, quality, delivery, etc. This control activity provides evidence of vendor existence to auditors. Pg 324 |
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Bill of Lading
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A contract between the shipper and the carrier; includes shipping information such as ship dates and origination, purchase order number, and signatures for receipt of merchandise. Pg. 325 |
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Capitalizing |
The recording of expenditures as assets and charging them to expense by a systematic allocation over a number of years. Pg. 321 |
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Clearing Accounts (Appendix 8C) |
The temporary storage places for transactions awaiting final accounting the should eventually have zero balances. Pg. 364 |
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Electronic Data Interchange (EDI) |
The transfer of data between/among different companies using networks such as the Internet. Pg. 324 |
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Ghost Employees (Appendix 8C) |
The fictitious or separated employees fraudulently maintained on the payroll to obtain checks. Pg. 360 |
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An account used for special purposes such as payroll or branch banking that is maintained at a zero or fixed balance in the general ledger. Checks written on the account are offset by deposits of the same amount. Pg. 363 |
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Matching
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The recognition of expenses in the same period as associated revenues. Pg. 321 |
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Purchase Order |
A formal contractual document (may be a computer document) between a buyer and a seller issued by the buyer establishing price, delivery point, delivery dates, and other information pertinent to the purchase. Pg. 324 |
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Purchase Requisition |
An internal document initialed by a department or person within the entity asking the purchasing department to buy specific goods or services. Pg. 324 |
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Receiving Report |
The documentation completed by the receiving department that includes receiving date and time, purchase order number, condition of material received, and amount of material received; provides evidence regarding the receipt of materials by the entity. Pg. 325 |
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Search for Unrecorded Liabilities |
A substantive procedure to test the completeness assertion for liability accounts. Pg. 331 |
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Substantive Tests of Transactions |
The tests of a sample of transactions during the period for monetary errors. Pg. 337 |
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Vendor's Invoice |
A bill sent from the vendor to the entity purchasing the goods or services. Pg. 325 |
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Voucher/Voucher Package |
A document used as a source for recording payables. It shows approvals, accounts, and amounts to be recorded, usually attached to the supporting purchase order, receiving report and vendor invoice. Pg. 325 |
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W-2 (Appendix 8C) |
The annual report of gross salaries and wages an the income, Social Security, and Medicare taxes withheld. Pg. 365 |
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Bill of Materials |
A list of raw materials and supplies used to build a product that is used to develop standard costs. Pg. 377 |
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Consignment Goods |
The goods that are given by one party, the consignor, to another party, the consignee, to sell; however, the consignee retains title until the goods are sold. Pg. 391 |
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Cycle Counts |
A method of physically counting different areas of inventory throughout the year. Pg. 390 |
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Inventory Roll-Forward |
An accounting process from date of physical inventory count to the end of the period; includes additions for purchases and production and reductions for sales, scrap, and so on. Pg. 389 |
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Material Requisition (Materials Transfer Ticket) |
A form used to obtain raw materials and supplies from an inventory custodian. Pg. 377 |
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Net Realizable Value (NRV)
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The selling price less costs to sell (e.g., sales commissions). Pg. 374 |
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Overhead Allocation |
An accounting procedure used to assign indirect costs to various products. Pg. 377 |
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Physical Inventory Count |
The client's procedure for determining actual amount of inventory on hand. Pg. 387 |
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Physical Inventory Observation |
The auditor's procedures during client's physical inventory count; includes observing inventory procedures and performing test counts on selected inventory items. Pg. 387 |
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Pricing and Compilation |
The procedure for translating units counted in the physical inventory count to amounts recorded in the accounting records, including gains or losses for shortages or overages; involves mathematically accumulating counts and applying standard costs. Pg. 391 |
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Production Order |
A document that communicates to production personnel the specific product, product quantity, and date a product is to be produced. Pg. 377
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Production Plan
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A schedule of goods to be produced for a period based on sales forecasts. Pg. 376 |
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Raw Materials Inventory Status Report |
A periodic report (usually daily or weekly) that includes a list of raw materials and the inventoried quantity of each material. Pg. 377 |
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Sales Forecast |
A report, usually prepared by marketing, predicting future sales of a product. Pg. 375 |
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Standard Costs |
The estimates of cost to produce a product; used for transferring products between departments and to finished goods and to record cost of goods sold; compared to actual costs to obtain variances. Pg. 377 |
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Accounting Estimate |
An approximation of a financial statement element, item, or account. Pg. 428 |
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Capital Budget |
A listing of the proposed expenditures for property, plant, and equipment or other capital items for a period of time (usually annually). The capital budget is submitted to senior management with corporate governance responsibilities for approval; is often a part of the annual budget. Pg. 421 |
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Compensating Control |
A control activity instituted by a company to offset the risk imposed by a weakness in another activity. Pg. 427 |
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Derivative Instrument |
A financial instrument whose value is based on an index or value of another financial instrument. Pg. 435 |
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Dual Control |
Having two people perform a task (e.g., open the mail) as a control over the process. Pg. 425 |
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Hedging Instrument |
An investment made to reduce the risk of adverse price movements in a security or future transaction by taking an offsetting position in a related security such as an option or a short sale. Pg. 435 |
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Indenture |
A written agreement between the issuers of bonds and the bondholders, usually specifying interest rate, maturity date, convertibility, and other terms. Pg. 431 |
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Joint Custody |
The safeguarding of assets by placing them in a secured area that requires two people to access (e.g., a cabinet with two locks to which no individual has both keys) Pg. 425 |
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Loan Covenant |
A provision in a loan agreement that requires the borrower to undertake or refrain from specified actions and to maintain specified financial levels and ratios. Pg. 418 |
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Registrar |
A financial institution appointed to record issue and ownership of company securities. Pg. 422 |
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Related Party |
A relationship between two businesses that have a personal or other association that might destroy the self-interest of one of the parties to an extent that one of them might be prevented from fully pursuing its own separate interests. Pg. 419 |
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Special Purpose Entity (SPE) |
A partnership formed by a company to pursue particular lines of business, often used to keep risky enterprises off the company's books. QSPE (qualified special purpose entity) is the newer term used by the FASB. Pg. 415 |
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Stock Certificate Book |
A book (similar to a checkbook) with prenumbered stock certificates. These certificates are issued to investors with the custodian of the book recording the number of shares, the owner's name, the date of issue, and other identification information; basically used only by small companies that are not traded publicly. Pg. 429 |
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Transfer Agent |
A bank or other company employed by a corporation to maintain shareholder records, including purchases, sales, and account balances. Pg. 422 |
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Trustee |
Agent of a bond issuer who handles the administrative aspects of a loan and ensures that the borrower complies with the terms of the bond indenture. Pg. 424 |
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Analytical Procedures |
Procedures that allow auditors to evaluate financial information by studying relationships among both financial and nonfinancial data. When used near the end of the audit, analytical procedures allow auditors to assess the conclusions reached during the audit and evaluate the overall financial statement process. Pg. 464 |
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Attorney Letter |
A communication prepared by the client but sent by the auditors to the client's attorneys that details all pending litigation, claims, and assessments against the client and that requests the attorneys to comment on these matters directly to the client's auditors. Pg. 467 |
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Audit Report Release Date |
The date on which auditors allow the client to use their reports in conjunction with the financial statements; also the date on which the client's financial statements are issued. Pg. 463 |
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Contingency |
An existing condition, situation, or set of circumstances involving uncertainty as to possible gain or loss to an enterprise that will ultimately be resolved when one or more future events occur or fail to occur. Pg. 466 |
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Date of the Auditor's Report |
The date on which auditors have gathered sufficient appropriate evidence on which to base their opinions on the financial statements and internal control over financial reporting; the date that will be used for auditors' reports on the client's financial statements and internal control over financial reporting. Pg. 463 |
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Date of the Financial Statements |
The year-end date of the latest period covered by the client's financial statements. Pg. 463 |
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Dual Date |
The use of two dates in the auditor's report to limit the responsibility beyond the date of the auditor's report to a specific subsequent event identified as a report. Pg. 479 |
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Engagement Quality Review |
A review of audit documentation by an additional person (normally, a partner or equivalent with the firm) who has not been involved with the audit to ensure that the quality of the audit work and reporting is consistent with the quality standards of the public accounting firm. Pg. 477 |
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Individual(s) Charged with Governance |
The person(s) responsible for overseeing the client's financial reporting process, including the internal control over financial reporting; individuals may include the client's management and full board of directors, but typically refers to public entities' audit committee of the board of directors. Pg. 482 |
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Iron Curtain Method |
The process used when evaluating the effect of uncorrected misstatements that considers the aggregate effect of current and prior misstatements in the entity's balance sheet. Pg. 474 |
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Management Letter |
A communication that provides a summary of auditors' recommendations resulting from the audit engagement that allows the client to improve the effectiveness and efficiency of its operations. Pg. 484 |
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Omitted Procedures |
The inadvertent failure of auditors to perform necessary audit procedures prior to the audit release date. Pg. 481 |
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Roll-Forward Procedures |
The procedures performed by auditors to extend the conclusions from an interim date to the date of the financial statements. Pg. 464 |
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Rollover Method |
The process used when evaluating the effect of uncorrected misstatements that considers only the current-period income effects of the potential adjustment. Pg. 474 |
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Subsequent Events |
Events occurring between the date of the financial statements and the date of the auditor's report. Pg. 478 |
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Subsequently Discovered Facts |
Information that becomes known to auditors after the date of their report that, had it been known at that time, may have caused the auditors to revise their report. Pg. 479 |
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Unasserted Claim |
A representation that no formal lawsuit or assertion has been filed or threatened on behalf of others against the audit client but that circumstances such as catastrophe, accident, or other physical occurrence could result in a suit or assertion being filed in the future. Pg. 469 |
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Uncorrected Misstatement |
A misstatement that the auditor identified and accumulated during the audit that has not been corrected (or adjusted) by the client. Pg. 474 |
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Written Representation |
A written assertion provided by management to auditors related to the entity's financial statements, the information provided to the auditors, and management's internal control over financial reporting to confirm certain matters and support other evidence obtained during the audit. Pg. 470 |
