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الجمعة، 22 مارس 2013

Auditing Dictionary of Terms part two

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 an auditor's expectation. An example is to compare 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 audit documentation.
analyze Identify and classify items for further study.
anticipated Expected.
apb opinions The Accounting Principles Board existed before the Financial Accounting Standards Board. It issued opinions, some of which are still part of generally accepted accounting principles.
applicable financial reporting framework is the financial reporting framework adopted in the preparation of the financial statements that is acceptable in view of the nature of the entity and the objective of the financial statements, or that is required by law or regulation.
application control Programmed procedure in application software designed to ensure completeness and accuracy of information.
appropriate audit evidence is relevant (pertains to the proposition supported) and reliable (trustworthy).
approve To authorize. A manager authorizes a cash payment by signing a voucher providing approval for the disbursement.
arm's length transactions are transactions between people who have no relationship other than that of buyer and seller.  The price is the true fair market value of the goods or services sold.  If you buy or sell something to a close relative, you might give better terms than to an unrelated party, so the price might not represent the true market value of the goods or services.
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.
assurance engagement is an engagement in which an accountant issues a report designed to enhance the degree of confidence of third parties and management about the outcome of an evaluation or measurement of financial statements (subject matter) against an applicable financial reporting framework (criteria).
attest (attestation) report In an attest engagement, a practitioner issues a written conclusion about the reliability of a written assertion that is the responsibility of another.
attestation risk is the risk the CPA may unknowingly fail to modify the report on management’s assertion. It is composed of inherent risk, control risk, and detection risk.
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 is a correction of a financial information misstatement identified by the auditor, whether recorded or not.
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 documentation (working papers) are records kept by the auditor of procedures applied, tests performed, information obtained, and pertinent conclusions reached in the engagement. The documentation provides the principal support for the auditor's report.
audit evidence is information used by the auditor in arriving at the conclusions on which the auditor's opinion is based.
audit objective In obtaining evidence in support of financial statement assertions, the auditor develops specific audit objectives in light of those assertions. For example, an objective related to the completeness assertion for inventory balances is that inventory quantities include all products, materials, and supplies on hand.
audit planning is developing an overall strategy for the audit. The nature, extent, and timing of planning varies with 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 body of the AICPA designated to issue auditing pronouncements.
authorize (authorization) To give permission for. A manager authorizes a transaction by signing a voucher authorizing the disbursement.
backup A copy of a computer program or data 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.
business risks are risks 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.
cancel supporting documents To mark supporting documents as having been used to support a transaction so the same documents can't be used to support another transaction. An example is stamping vouchers "paid.”
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 leased asset is depreciated by the lessee as though it were legally owned by the lessee. 

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