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Bank transfer
moving cash from one bank account to another. May be between two accounts in the same bank or from one bank the company maintains an account with to another
Brokers’ advice
a notification sent by a stockbrokerage frim to a customer reporting the terms of a purchase or sale of securities
Canceled checks
a check the amount of which has been substracted from a depositor’s account and had been marked as “canceled” by a financial institution. A canceled check has been endorsed by the payee and paid by the drawee financial institution. A canceled check is in contrast to a voided check
Check clearing for the 21st century act
this act allows financial institutions to create and process electronic “"substitute checks” in place of customer written hard-copy checks. The purpose of this act is to decrease the time for check clearing
Critical audit matter (CAM)
as included in the PCAOB auditing standards, a matter arising from the audit of the financial statements of that communicated or required to be communicated to the audit committee and that relates to accounts or disclosures that are material to the financial statements and involved especially challenging, subjective, or complex auditor judgment
Cutoff bank statement
a bank statement covering a specified number of business days after the client’s balance sheet date. Auditors use this statement to determine that checks issued on or before the balance sheet date and paid during the cutoff period were listed as outstanding on the year-end bank reconciliation. Another use is to determine that reconciling items shown on the year-end bank reconciliation have cleared the bank within a reasonable amount of time
Management review controls
reviews conducted by management of estimates and other kinds of financial information for reasonableness. They often involve the use of significant judgment, knowledge, and experience in comparing recorded amounts with expectations of the reviewers. They often are considered monitoring controls but may relate to any of the other COSO components that have the common misstatements or breakdowns in other controls
Derivatives
Financial instruments that derive their value from other financial instruments, underlying assets, or indexes. Examples are options, forward contracts, and futures contracts.
Dividend recorded book
A reference book published monthly by investment advisory services reporting detailed information concerning all listed and many unlisted securities; includes dividend dates and amounts, current prices of securities, and other condescend financial data
Aged trial balance
a listing of individual customer’s accounts classified by the number of days subsequent to billings, that is, by age. A preliminary step in estimating the collectability of accounts receivables
Channel stuffing
a marketing practice that suppliers sometimes use to boost sales by inducing customers to buy substantially more inventory that they can promptly resell. Channel stuffing without appropriate provision for sales returns is an example of booking tomorrow’s revenue today in order tow window dress the financial statements
External confirmation
audit evidence obtained by the auditors as a direct written response to the auditors from a third party in paper or by electronic or other medium
Confirming party
The individual who responds to the confirmation request. Responses to confirmation requests provide more relevant and reliable audit evidence when the confirmation requests are sent to confirming parties who the auditors believe are knowledgeable about the information to be confirmed. For example, individual in accounts payable may provide more relevant and reliable audit evidence with respect to a client’s receivable balance than an individual who has no direct access to accounts payable records
Bots
Software applications that are programmed to do certain repetitive tasks. Use to automate the entire confirmation process, including requesting the information, following up on non respondents, and summarizing the results including sampling results, if applicable.
Fidelity Bond
a form of insurance protection that covers policyholders for losses that they incur as a result of fraudulent acts by specified individuals. Fidelity bonds usually insure a business for losses caused by the dishonest acts of its employees
Interim audit work
Those audit procedures that are performed before the balance sheet date. The purpose is to facilitate earlier issuance of the audit report and to spread the auditor’s work more uniformly over the year
Negative confirmation request
a request that the conformity party respond directly to the auditors indicating where the confirming party disagrees with the information in the request
Pledging of receivables
To assign to a bank, factor, finance company, or other lender an exclusive claim against accounts receivables as security for a debt
Positive confirmation request
A request that the confirming party responded directly to the auditor providing the requested information or indicating whether the confirming party agrees or disagrees with the information in the request
Side agreements
Formal or informal modifications of normal terms and conditions of sales transactions to entice customers to accept delivery of goods or services
Electronic funds transfer system
a computer system that transmits and processes funds- related cash disbursements and receipt transactions. Increasingly, companies are electronically transferring funds between bank accounts rather than issuing checks
Electronic data interchange
a computer network between companies that allows the interchangeable of data from one company’s computer to the other’s
Kiting
Manipulations causing amount of cash to be included simultaneously in the balance of two or more bank accounts. Kiting schemes are based on the float period-the time necessary for a check deposited in one bank to clear the bank on which it was drawn
Lockbox
a post office box controlled by a company’s bank at which cash remittances form customers are received. The bank picks up the remittances, immediately credits the cash to the company’s bank account, and forwards the remittance advices to the company
Proof of cash
An audit procedure that reconciles the bank’s record of cash activity with the client’s accounting records for a test period. The working paper used for the proof of cash is a four-column bank reconciliation
Standard confirmation form
A confirmation form, agreed to by the AICPA, the American Bankers Association, and the Bank Administration Institute, that is designed to provide corroborating evidence about the client’s account balance and outstanding loans
Voided check
a check that is not negotiable. results from an error in preparing the check
Voucher
a document authorizing a cash disbursement. Provides spaces for the initials of employees performing various approval functions. Applied to the group of supporting documents used as a basis for recording liabilities or for making cash disbursements
Voucher register
A special journal used to record the liabilities for payment originating in a voucher system. The debit entries are the cost distribution of the transactions, and the credits are Vouchers Payable. Every transaction recorded in a voucher register corresponds to a voucher authorizing future payment of cash
Window dressing
Action taken by the client shortly before the balance sheet date to improve the financial picture presented in the financial statements
Bill and hold transactions
Transactions in which sales of merchandise are billed to customer prior to delivery, with the goods being held by the seller. These transactions may overstate revenues and net income if they do not meet specific requirements for recognition as sales
Bill of lading
A document issued by a common carrier acknowledging the receipt of goods and setting forth the provisions of the transportation agreement
Consigment
A transfer of goods from the owner to another person who acts as the sales agent of the owner
Cost Accounting Standards Board
A five-member board established by Congress to narrow the options in cost accounting that are available under generally accepted accounting principles. Companies having significant supply contracts with certain U.S. government agencies are subject to the cost accounting standards established by the board
Job time tickets
A document designed to accumulate the labor and machine time devoted to a particular production order
Master production schedule
A schedule that is used to plan overall production for a period of time. The schedule illustrate the gross production of each of the company’s products
Production Order
a document that authorizes the production of a specific quantity of a product
Observation
The auditors’ evidence-gathering technique of view a client activity to obtain physical evidence of performance
Perpetual inventory system
A method of accounting for inventories in which controlling accounts and subsidiary ledgers are maintained to record receipts and issuance of goods, both in quantities and in dollar amounts. The accuracy of perpetual inventory records is tested periodically inventories
Purchase commitment
A contractual obligation to purchase goods at fixed prices, entered into well in advance of scheduled delivery dates
Sales commitment
a contractual obligation to sell goods at fixed prices, entered into well in advance of scheduled delivery dates
Periodic inventory system
A method of accounting in which inventories are determined solely by means of a physical inventory at the end of the accounting period
