ACCT - Terms 2 Flashcards

Terms Definitions
integration
eliminating duplicate recording, storage, reporting and other processing activities in an organization
Accounting
planning, recording, analyzing, and interpreting financial information
(st+lt debt)/assets
debt to asset ratio
interrogatories
written questions submitted by the opposing attorney, answered in writing under oath
operations
activities transform inputs into final products or services
Do Service Businesses have an inventory?
No
cashier
who handles customer remittances and deposits them in the bank?
Average Cost



žAssumes a weighted-average cost per item is assigned to items as sold


žCost of goods sold and ending inventory will fall between amounts determined by FIFO and LIFO 
Account Title
the name given to an account
When was the exclusion of employer provided healthcare from employee taxable income instituted?
WWII.
Intangible Assets
Things without physical existence but meet the 3 characteristics to qualify as assets (i.e. = trademarks; goodwill).
person receiving alimony
who pays tax on alimony?
JIT
seeks to minimize inventory by only making purchases after sales; used primary for products for which it is hard to forecast demand
Dividends
This account reflects the amount of earnings that have been distributed to the stockholders.  Dividends decrease retained earnings (and, therefore, Stockholders' equity).
auditor
a person appointed and authorized to examine accounts and accounting records, compare the charges with the vouchers, verify balance sheet and income items, and state the result.
credit memorandum
Source document prepared by the vendor showing the amount deducted for returns and allowances
Three ways businesses are organized?
Sole proprietorship, partnership, corporation
Statute of Limitations
Determines the time period for initiating a legal action.
cash disbursement
The fourth phase step of the expenditure cycle
high
if Time AR Outstanding is __: credit terms are too easy (earnings mgmt?), customers in trouble, firm doesn't chase debtors as they should
Statement of Retained Earnings
Company
Statement of retained earnings
month ended dec 31
Retained earnings for december 1, 2001            1000
Add: Net Income    400
Less: Dividends    300
Retained Earning for december 31, 201    1100
 
Control Deficiency
a deficiency in the design or operation of controls that does not permit company personnel to prevent ot detect misstatements on a timely basis
accounting information system (AIS)
system that collects, records, stores, and processes data to produce information for decision makers
Business ethics
The use of ethics in making business decisions
a taxpayer must realize and recognize income when it is actually or constructively recieved
constructive receipt doctrine
A. Send positive confirmation requests
15. Hemp, CPA, is auditing the financial statements of a small rural municipality. The receivable balances represent residents' delinquent real estate taxes. Internal control at the municipality is weak. To determine the existence of the accounts receivable balances at the balance sheet date, Hemp would most likely A. Send positive confirmation requestsB. Send negative confirmation requestsC. Inspect the internal records such as copies of the tax invoices that were mailed to the residentsD. Examine evidence of subsequent cash receipts
C. Statements on Auditing Standards (SASs)
The serially-numbered pronouncements issued by the Auditing Standards Board over a period of years are known as: A. Auditing Statements of Position (ASPs).B. Accounting Series Releases (ASRs).C. Statements on Auditing Standards (SASs).D. Statements on Auditing Principles (SAPs).
User's decisions are unlikely to be affected
Unqualified Opinion, Immaterial
burden of proof 1
the party making the complaint or argument
Automobile manufacturing, oil refinery, and food processing.
What types of industries would use process costing?
credit memo
used in the revenue cycle to adjust a customer's account
c. Considered discreditable to the profession
11. A CPA's retention of client records as a means of enforcing payment of an audit fee is:a.. Considered acceptable by the AICPA Code of Professional Conduct.b. Ill advised since it would impair the CPA's independence with respect to the client.c. Considered discreditable to the profession.d. A violation of generally accepted auditing standards
Government Accountability Office Auditor
an auditor working for the U.S. G.A.O.; the GAO reports to and is responsible solely to Congress
Unearned Compensation on Restricted Stock
Stock that has been awarded to specific officers of the company but not yet earned.
separate recording from cash collections
control procedure for writing off a customer's accounts receivable balance as uncollectible to conceal the theft of subsequent collections
c. Advertising including an indication that the firm has a close relationship with several tax court judges
29. Which of the following forms of advertising would most likely to be considered to be a violation of Rule 502 of the AICPA Code of Professional Conduct?a. Advertising including the types of services offered and the standard fees for the services.b. Advertising including the experience of the firm's professional staff.c. Advertising including an indication that the firm has a close relationship with several tax court judges.d. Advertising including the percentage of the firm's staff that have CPA certificates.
Internal Control over Financial Reporting
an attestation engagement in which the auditor reports on the effectiveness of internal control over financial reporting; such reports are required for public companies under Section 404 of SOX
deduct percentage of expenses as FOR AGI DEDUCTIONS
how are expenses deducted for percentage ownership of flow thru entities?
B. Inspecting employee time cards for proper approval by supervisors
108. For which of the following audit tests would an auditor most likely use attribute sampling?A. Selecting accounts receivable for confirmation of account balancesB. Inspecting employee time cards for proper approval by supervisorsC. Making an independent estimate of the amount of a LIFO inventoryD. Examining invoices in support of the valuation of fixed asset additions
Audit report on the effectiveness of internal control over financial reporting for public companies under Section 404 of SOX that cross-references the separate audit report ont he financial statements
Separate report on internal control over financial reporting
For revenue recognition, should auditors presume that there is a risk of material misstatement due to fraud?
Yes, SAS 99 says so. Ctrls should be in place.
A. Request the senders to mail the original forms to the auditor
29. To reduce the risk associated with accepting e-mail responses to requests for confirmation of accounts receivable, an auditor most likely wouldA. Request the senders to mail the original forms to the auditorB. Examine subsequent cash receipts for the accounts in questionC. Consider the e-mail responses to the confirmations to be exceptionsD. Mail second request to the e-mail respondents
What does the CEO do?
The CEO runs the company on a day by day basis.
d. A partner in the firm has an investment in a mutual fund that has a direct interest in the client
27. Jones & Company CPAs has one office. Which of the following is least likely to impair independence with respect to an audit client?a. The client owes the firm for two prior years' audit fees.b. A partner in the CPA firm is the son of the president of the client.c. The wife of a partner in the firm has a small direct financial interest in the client.d. A partner in the firm has an investment in a mutual fund that has a direct interest in the client.
D. Request the client to have the bank seal the safe deposit box until the auditor can count the securities at a subsequent date
81. A client has a large and active investment portfolio that is kept in a bank safe deposit box. If the auditor is unable to count the securities at the balance sheet date, the auditor most likely willA. Request the bank to confirm to the auditor the contents of the safe deposit box at the balance sheet dateB. Examine supporting evidence for transactions occurring during the yearC. Count the securities at a subsequent date and confirm with the bank whether securities were added or removed since the balance sheet dateD. Request the client to have the bank seal the safe deposit box until the auditor can count the securities at a subsequent date
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