Acct : Exam Vocabulary Flashcards

Terms Definitions
criminal case
"state v. defendant"
treaties
international law, contracts between countries
FEDI
integrates EFT, for processing customer payments, with EDI, for processing related remittance data to update accounts receivable
involuntary manslaughter
an unintentional killing resulting from conduct so reckless that it causes extreme danger of death or injury, drunk driving
support activities
firm infrastructure, human resources, technology, purchasing; five primary activities that support the primary activities
Is the Manufacturer's Income Statement similar to the Retailer's Income Statement?
Yes
cashier
For good internal control over customer remittances, the mailroom clerk should separate the checks from the remittance advices and send the customer payments to which department?


Accrued expense



žExpense is incurred before payment is made


žDebit an expense; credit a liability
Accounting Equation
An equation showing the relationship among assets, liabilities, and owner's equity
Defalcation
Another name for employee fraud and embezzlement
Does a Perpetual System have a Purchases Account?
No
imputed income
indirect economic benefits received by the tp
receiving report
document that records quantities of goods received
C. Adverse opinion
34. A scope restriction is least likely to result in a(an): A. Qualified opinion.B. Disclaimer of opinion.C. Adverse opinion.D. Standard unqualified opinion.
Related Party
affiliated party, principal owner of the client company, or any other party with which the client deals, where one of the parties can influence the management or operating policies of the other
characteristics of useful information
relevant, reliable, complete, timely, understandable, verifiable, accessible
back order
a document authorizing the purchase or production of items for which sufficient quantity is not available to meet customer needs
Who is the largest integrated steel manufacturer in the U.S?
U.S. Steel
audit trail
depicts the path of a transaction through the accounting system; provides information needed to trace all changes made to the general ledger
decreases, increases
buying t. stock __ s.holder's equity and __ ROCE. is the high ROCE due to t. stock or successful operations?
D. Assess the difficulty in controlling the incremental audit risk
5. Before applying principal substantive tests to an entity's accounts receivable at an interim date, an auditor shouldA. Consider the likelihood of assessing the risk of incorrect rejections too lowB. Project sampling risk at the maximum for tests covering the remaining periodC. Ascertain that accounts receivable are immaterial to the financial statementsD. Assess the difficulty in controlling the incremental audit risk
CPA
a person who has met state regulatory requirements, including passing the CPA exam, and has thus been certified; a CPA may have as his or her primary responsibility the performance of the audit function on published historical FS of commercial and noncommercial financial entities.
earnings per share
net income for each share of outstanding stock
Cons of Sole Proprietorship?
Personal assets are subject to liability
Ending Inventory
Goods still on hand and available for sale at the end of the period.
earnings growth rate
to incorporate growth P/E is divided by annual __ to yield the PEG ratio. PEG indicates whether a stock is over/undervalued
A. Unreturned negative confirmation requests rarely provide significant explicit evidence
22. Which of the following statements is correct concerning the use of negative confirmation requests?A. Unreturned negative confirmation requests rarely provide significant explicit evidence.B. Negative confirmation requests are effective when detection risk is low.C. Unreturned negative confirmation request indicate that alternative procedures are necessary.D. Negative confirmation request are effective when understatements of account balances are suspected.
capital (financial) leverage
portion of a firms assets financed with debt. involves contractual interest and principal obligations. high leverage means more risk and more interest expense
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Statement of Income or Earnings
Explains why the retained earnings classification within owners' equity has changed over a period of time - assuming owners have not taken assets in the form of dividends.
o Update general ledgero Post adjusting entrieso Prepare financial statementso Produce managerial reports
Four basic activities performed by the general ledger and reporting system
B. Inspect agreements to determine whether any inventory is pledged as collateral or subject to any liens
40. Which of the following audit procedures probably would provide the most reliable evidence concerning the entity's assertion of rights and obligations related to inventories?A. Inspect the open purchase order file for significant commitments that should be considered for disclosureB. Inspect agreements to determine whether any inventory is pledged as collateral or subject to any liensC. Select the last few shipping advices used before the physical count and determine whether the shipments were recorded as salesD. Trace test counts noted during the entity's physical count to the entity's summarization of quantities
Audit report on the financial statements and the effectiveness of internal control over financial reporting required for public companies under section 404 of Sarbanes--Oxley Act
Combined report on financial statements and internal control over financial reporting
What company held the Patent for Prozac?
The Eli Lilly Pharmaceutical Company
4 inherent risks of revenue recognition
1. improper revenue recognition 2. returns and allowances 3. collectibility of receivables 4. lapping
B. Inspect the entity's reports of pre-numbered shipping documents that have not been recorded in the sales journal
19. Which of the following audit procedures would an auditor most likely perform to test controls relating to management's assertion concerning the completeness of sales transactions?A. Verify that extensions and footings on the entity's sales invoices and monthly customer statements have been recomputed.B. Inspect the entity's reports of pre-numbered shipping documents that have not been recorded in the sales journal.C. Compare the invoiced prices on pre-numbered sales invoices to the entity's authorized price list.D. Inquire about the entity's credit granting policies and the consistent application of credit checks.
When there is substantial doubt about the entities ability to continue as going concern, _____ is required.
unqualified opinion with an explanatory paragraph.
What costs are associated with purchasing land?
1. Broker's Commission 2. Cost to place the land in operation. 3. Destruction of the old building.
A. The amount of time budgeted to complete the engagement
86. Which of the following factors would least likely affect the extent of the auditor's consideration of the client's internal controls?A. The amount of time budgeted to complete the engagementB. The size and complexity of the clientC. The nature of specific relevant controlsD. The auditor's prior experience with client operations
potential misstatements with cash collections (3)
1. not deposited on timely basis 2. not deposited in full 3. cash collected doesn't link to AR
state, local, and foreign income taxes, real estate taxes, and personal property taxes
What types of taxes qualify to be deducted as itemized deductions
B. There was a material misstatement in the financial statements
Quincy bought Teal Corp. common stock in an offering registered under the Securities Act of 1933. Worth & Co., CPAs, gave an unqualified opinion on Teal's financial statements that were included in the registration statement filed with the SEC. Quincy sued Worth under the provisions of the 1933 Act that deal with omission of facts required to be in the registration statement. Quincy must prove that: A. There was fraudulent activity by Worth.B. There was a material misstatement in the financial statements.C. Quincy relied on Worth's opinion.D. Quincy was in privity with Worth.
Most important causes of the addition of an explanatory paragraph:
1. lack of consistent application of GAAP 2. Substantial doubt about going concern 3. Auditor agree with a departure from promulgated principles 4. emphasis of a matter 5. reports involving other auditors
A. Must exercise the level of care, skill, and judgment expected of a reasonably prudent CPA under the circumstances
Under common law, when performing an audit, a CPA: A. Must exercise the level of care, skill, and judgment expected of a reasonably prudent CPA under the circumstances.B. Must strictly adhere to generally accepted accounting principles.C. Is strictly liable for failures to discover client fraud.D. Is not liable unless the CPA commits gross negligence or intentionally disregards generally accepted auditing standards
C. A CPA may be exposed to criminal as well as civil liability
Which of the following is accurate with respect to litigation involving CPAs? A. A CPA will not be found liable for an audit unless the CPA has audited all affiliates of that company.B. A CPA may not successfully assert as a defense that the CPA had no motive to be part of a fraud.C. A CPA may be exposed to criminal as well as civil liability.D. A CPA is primarily responsible, while the client is secondarily responsible for the notes in an annual report filed with the SEC.
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