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accounting 8
accounting chapter 8 WGU C213
| Term | Definition |
|---|---|
| errors | unintended mistakes are made in recording transactions, posing transactions, summarizing account ect. |
| disagreements | different people arrive at different conclusions based on the same facts |
| frauds | intentional errors |
| inaccurate financial reports can results from? | - unintended errors -disagreements in judgement -fraud |
| Sarbanes- Oxley Act (corporate responsibility act) | a law from 2002, gives SEC significant oversight responsibility and control over companies issuing financial statements and their external auditors |
| 5 Basic Categories Internal Control Structure | 1) control enviorment 2) risk assessment 3) control activies 4) info and communication 5) monitoring |
| control enviorment | actions, policies and procedures that reflect the overall attitudes of top management about control and its importance to the entity |
| organizational structure | lines of authority and responsibility |
| audit committee | members of a companys board of directors who are responsible for dealing with the external and internal auditors |
| control activities | policies and procedures used by management to meet their objectives |
| control procedures | policies and procedures used by management to meet their objectives |
| control activates 5 categories | 1) segregation of duties 2) proper procedures of authorizations 3) physical control over assets and records 4) adequate documents and records 5) independent checks on performance |
| preventative controls | internal control activies that are designed to prevent the occurrence of errors and fraud |
| detective controls | internal control activities that are designed to detect the occurrence of errors and fraud |
| segregation of duties | strategy to provide an internal check on performance through separation of: authorization of transactions from custody of related assets, operational reasonability's from record-keeping responsibilities, custody of assets from accounting personal |
| physical safeguards | physical precautions to protect assets and records |
| independent checks | procedures for continual internal verification of other controls |
| control enviorment | 1)management philosophy and operating style 2)organization structure 3) audit commitee |
| control activates (procedures) | prevention control: 1)segregation of duties 2) proper procedures for auth 3) physical control over assets and records detective control: 4)adequate documents and records 5) independent checks on performance |
| internal earnings targets | financial goals established within a company |
| income smoothing | the practice of carefully timing the recognition of revenues and expenses to even out the amount of reported earnings from one year to the next |
| income smoothing | practice of carefully timing the recognition of revenues and expenses to even out the amount of reported earnings from 1 year to the next |
| GAAP oval | diagram that represents the flexibility a manager has, within GAAP, to report one earnings number among many possibilities based on different methods and assumptions |
| reason management might manage earnings: | pressure to meet internal earnings target pressure to meet external expectations smoothing income preparing to apply for a loan or to offer stock to the public |
| earnings management looks like: | careful timing of transactions changing acct methods or estimates w full disclosure changing acct methods or estimates w/o adequate disclosure Non-GAAP acct fictitious transactions |
| Persons if high personal integrity should be associated with earnings management because? | of possible abuses associated with earnings management can happen |
| Public Company Accounting Oversight Board (PCAOB) | board of 5 fulltime members established by Sarbanes-Oxley Act to oversee the accounting and auditing profession |
| internal auditors | independent group of experts who monitor op results and financial records, detect fraud |
| external auditors | independent CPAs who are retained by organizations to perform audits of financial statements |
| Securities and Exchange Commission (SEC) | gov, responsible for regulating the financial reporting practices of most publicly owned corporations in connection with the buying/selling of stocks and bonds |
Created by:
1piper4me
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