Financial Accounting 15Th Ed.

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accounting system

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The personnel, procedures, devices, and records used by an organization to develop accounting information and communicate that information to decision makers.

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American Accounting Association

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A professional accounting organization consisting primarily of accounting educators that is dedicated to improving accounting education, research, and practice.

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American Institute of CPAs

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A professional accounting organization of certified public accountants that engages in a variety of professional activities, including establishing auditing standards for private companies, conducting research, and establishing industry-specific financial reporting standards.

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audit

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An investigation of financial statements designed to determine their fairness in relation to generally accepted accounting principles.

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balance sheet

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A position statement that shows where the company stands in financial terms at a specific date. (Also called the statement of financial position.)

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bookkeeping

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The clerical dimension of accounting that includes recording the routine transactions and day-to-day record keeping of an enterprise.

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cash flow prospects

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The likelihood that an enterprise will be able to provide an investor with both a return on the investor's investment and the return of that investment.

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Certified Internal Auditor

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A professional designation issued by the Institute of Internal Auditors signifying expertise in internal auditing.

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Certified Management Accountant

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A professional designation issued by the Institute of Management Accountants signifying expertise in management accounting.

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Certified Public Accountant

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An accountant who is licensed by a state after meeting rigorous education, experience, and examination requirements.

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Committee of Sponsoring Organizations of the Treadway Commission (COSO)

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A voluntary private-sector organization dedicated to improving the quality of financial reporting through business ethics, effective internal controls, organizational governance, and enterprise risk management.

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control activities

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Policies and procedures that management puts in place to address the risks identified during the risk assessment process.

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control environment

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The foundation for all the other elements of internal control, setting the overall tone for the organization.

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corporate governance

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Includes the corporate structures and processes for overseeing a company's affairs, for example, the board of directors and the company's internal control processes.

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external users

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Individuals and other enterprises that have a financial interest in the reporting enterprise but that are not involved in the day-to-day operations of that enterprise (e.g., owners, creditors, labor unions, suppliers, customers).

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financial accounting

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Providing information about the financial resources, obligations, and activities of an economic entity that is intended for use primarily by external decision makers—investors and creditors.

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Financial Accounting Standards Board (FASB)

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A private-sector organization that is responsible for determining generally accepted accounting principles in the United States.

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financial statement

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A monetary declaration of what is believed to be true about an enterprise.

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general-purpose information

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Information that is intended to meet the needs of multiple users that have an interest in the financial activities of an enterprise rather than tailored to the specific information needs of one user.

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generally accepted accounting principles (GAAP)

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Principles that provide the framework for determining what information is to be included in financial statements and how that information is to be presented.

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Government Accountability Office

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A federal government agency that audits many other agencies of the federal government and other organizations that do business with the federal government and reports its findings to Congress.

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income statement

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An activity statement that shows details and results of the company's profit-related activities for a period of time.

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information and communication

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The organization's process for capturing operational, financial, and compliance-related information necessary to run the business, and communicating that information downstream (from management to employees), upstream (from employees to management), and across the organization.

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Institute of Internal Auditors

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A professional accounting organization that is dedicated to the promotion and development of the practice of internal auditing.

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Institute of Management Accountants

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A professional accounting organization that intends to influence the concepts and ethical practice of management accounting and financial management.

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integrity

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The qualities of being complete, unbroken, unimpaired, sound, honest, and sincere.

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internal control

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A process designed to provide reasonable assurance that the organization produces reliable financial reports, complies with applicable laws and regulations, and conducts its operations in an efficient and effective manner.

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Internal Revenue Service

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A government organization that handles millions of income tax returns filed by individuals and businesses and performs audit functions to verify the data contained in those returns.

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internal users

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Individuals who use accounting information from within an organization (for example, board of directors, chief financial officer, plant managers, store managers).

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International Accounting Standards Board (IASB)

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The group responsible for creating and promoting International Financial Reporting Standards (IFRSs).

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management accounting

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Providing information that is intended primarily for use by internal management in decision making required to run the business.

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monitoring

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The process of evaluating the effectiveness of an organization's system of internal control over time, including both ongoing management and supervisory activities and periodic separate evaluations.

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Public Company Accounting Oversight Board (PCAOB)

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A quasi-governmental body charged with oversight of the public accounting profession. The PCAOB sets auditing standards for audits of publicly traded companies.

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return of investment

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The repayment to an investor of the amount originally invested in another enterprise.

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return on investment

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The payment of an amount (interest, dividends) for using another's money.

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risk assessment

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A process of identifying, analyzing, and managing those risks that pose a threat to the achievement of the organization's objectives.

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Sarbanes-Oxley Act

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A landmark piece of securities law, designed to improve the effectiveness of corporate financial reporting through enhanced accountability of auditors, boards of directors, and management.

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Securities and Exchange Commission (SEC)

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A governmental organization that has the legal power to establish accounting principles and financial reporting requirements for publicly held companies in the United States.

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statement of cash flows

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An activity statement that shows the details of the company's activities involving cash during a period of time.

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statement of financial position

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Also called the balance sheet.