Ch. 1

controller

The job title of the person who is the chief accounting officer of an organization. The controller is usually responsible for both the financial and managerial accounting functions. Sometimes referred to as comptroller.

independence

The personal characteristic of an accountant, especially an auditor, that refers to both appearing and in fact being objective and impartial.

integrity

The personal characteristic of honesty, including being forthright in dealings and communications with others.

objectivity

The personal characteristic of impartiality, including freedom from conflict of interest. public accounting The segment of the accounting profession that provides auditing, income tax accounting, and management consulting services to clients.

internal auditing

The practice of auditing within a company by employees of the company.

auditing

The process of examining the financial statements of an entity by an independent third party with the objective of expressing an opinion about the fairness of the presentation of the entity's financial position, results of operations, changes in financial position, and cash flows. The practice of auditing is less precisely referred to as public accounting.

accounting

The process of identifying, measuring, and communicating economic information about an organization for the purpose of making decisions and informed judgments.

independent auditor's report

The report accompanying audited financial statements that explains briefly the auditor's responsibility and the extent of work performed. The report includes an opinion about whether the information contained in the financial statements is presented fairly in accordance with generally accepted accounting principles.

The Sarbanes-Oxley Act

2002, created the five-member Public Company Accounting Oversight Board (PCAOB), which has the authority to set and enforce auditing, attestation, quality control, and ethics standards for public companies

annual report

A document distributed to shareholders and other interested parties that contains the financial statements, notes to the financial statements, and management's discussion and analysis of financial and operating factors that affected the firm together with the report of the external auditor's examination of the financial statements.

Cost Accounting Standards Board (CASB)

A group authorized by the U.S. Congress to establish cost accounting standards for government contractors.

Certified Public Accountant (CPA)

A professional designation earned by fulfilling certain education and experience requirements, in addition to passing a comprehensive, four-part examination. Examination topics include financial accounting theory and practice, income tax accounting, managerial accounting, governmental and not-for-profit accounting, auditing, business law, and other aspects of the business environment.

cost accounting

A subset of managerial accounting that relates to the determination and accumulation of product, process, or service costs.

Accounting Standards Update (Update or ASU)

A transient document that communicates the details of specific amendments to the FASB Codification and explains the basis for the Board's decisions. Although ASUs update the FASB Codification, the FASB does not consider Updates as authoritative in their own right.

Securities and Exchange Commission (SEC)

A unit of the federal government that is responsible for establishing regulations and ensuring full disclosure to investors about companies and their securities that are traded in interstate commerce.

financial accounting

Accounting that focuses on reporting an entity's financial position at a point in time and/or its results of operations and cash flows for a period of time.

managerial accounting

Accounting that is concerned with the internal use of economic and financial information to plan and control many of the activities of an entity and to support the management decision-making process.

accrual accounting

Accounting that recognizes revenues and expenses as they occur, even though the cash receipt from the revenue or the cash disbursement related to the expense may occur before or after the event that causes revenue or expense recognition.

FASB Accounting Standards Codification (FASB Codification)

An advanced user-accessible computer application that systemized and reorganized many divergent elements of U.S. GAAP into one composite structure permitting users to review, study, and research topics. The Codification presents U.S. GAAP in a uniform and logical order, with approximately 90 major accounting topics. Since July 2009, the FASB Codification has represented a single source of all U.S. GAAP.

Financial Accounting Foundation (FAF)

An organization composed of people from the public accounting profession, businesses, and the public that is responsible for the funding of and appointing members to the Financial Accounting Standards Board and the Governmental Accounting Standards Board.

investor

An organization or individual who has an ownership interest in the firm. For corporations, referred to as stockholder or shareholder.

creditor

An organization or individual who lends to the entity. Examples include suppliers who ship merchandise to the entity prior to receiving payment for their goods and banks that lend cash to the entity.

entity

An organization, individual, or a group of organizations or individuals for which accounting services are performed.

Financial Statement

Balance Sheet-Statement offin. pos. Income Statement- Profit and loss Statement of cash flows Statement of owners eauity

cash flow

Cash receipts or disbursements of an entity.

Governmental Accounting Standards Board (GASB)

Established by the Financial Accounting Foundation to develop guidelines for financial accounting and reporting by state and local governmental units.

Public Company Accounting Oversight Board

Established in 2002 with authority to set and enforce auditing and ethics standards for public companies and their auditing firms; affiliated with the SEC.

bookkeeping

Procedures that are used to keep track of financial transactions and accumulate the results of an entity's financial activities.

Certified Management Accountant (CMA)

Professional designation earned by passing a broad, two-part examination and meeting certain experience requirements. Examination topics include budgeting, performance management, cost management, financial statement analysis, corporate finance, decision analysis, and professional ethics.

generally accepted accounting principles (GAAP)

Pronouncements of the Financial Accounting Standards Board (FASB) and its predecessors that constitute appropriate accounting for various transactions used for reporting financial position and results of operations to investors and creditors. Since July 2009, the FASB Codification has represented a single source of U.S. GAAP.

Statements of Financial Accounting Standards (SFAS)

Pronouncements of the Financial Accounting Standards Board that formerly constituted generally accepted accounting principles. Effective in July 2009, the SFAS series was superseded by the FASB Accounting Standards Codification.

Financial Accounting Standards Board (FASB)

The body responsible for establishing U.S. generally accepted accounting principles.

International Accounting Standards Board (IASB)

Standard-setting body responsible for the development of International Financial Reporting Standards (IFRS) permitted or required by more than 100 countries. International Financial Reporting Standards (IFRS) Pronouncements of the International Accounting Standards Board that are considered to be a "principles-based" set of Page 25standards in that they establish broad rules as well as dictate specific treatments. Many of the standards forming part of IFRS are known by the older name of International Accounting Standards (IAS).

generally accepted auditing standards (GAAS)

Standards for auditing that are established by the Auditing Standards Board of the American Institute of Certified Public Accountants unless superseded or amended by the PCAOB.