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Auditing Glossary of Terms

SmartPros and Accounting Institute Seminars® are proud to bring you an online glossary of auditing terms. Definitions are provided by Accounting Institute Seminars. The words defined below all have appeared on CPA exam questions, so they are worth knowing if you are studying for the auditing exam.

Return to A-I Glossary

journal A book of original entry in a double-entry system. The journal lists all transactions and the accounts to which they are posted.
 
just-in-time An inventory system that attempts to minimize inventory costs that do not add value for the customer. It arranges for suppliers to deliver small quantities of raw materials just before those units are needed in production. Storing, insuring, and handling raw materials are costs that add no value to the product, and are minimized in a just in time system.
kiting Drawing a bank check on insufficient funds to take advantage of the time required for collection.
 
lapping A scheme to cover an embezzlement by using payments made by one customer to reduce the receivables balance of another customer.
 
lead schedule The schedule at the beginning of audit documentation that summarizes the detailed schedules.
lifo "Last In First Out" inventory cost flow.
 
limit test (limit check). A computer program step that compares data with predetermined limits as a reasonableness test (hours worked over 60 per week).
 
liquidity The availability of cash or ability to obtain it quickly. Debt paying ability.
 
lockbox (bank lockbox) speeds the availability of funds from cash collections by reducing the time from the customer mailing the check until the funds are available to spend. Remittances are sent to a bank near the customer and the bank deposits funds speedily to the payee's account.
 
management controls are controls performed by one or more managers.
 
management representation letter A letter addressed to the auditor, signed by the client's chief executive office and chief financial officer. During an audit, management makes many representations to the auditor. Written representations from management in the letter confirm oral representations given to the auditor, document the continuing appropriateness of such representations, and reduce the possibility of misunderstanding.
 
manual controls are controls performed manually, not by computer.
 
material (materiality) Information important enough to change an investor's decision. Insignificant information has no effect on decisions, so there is no need to report it. Materiality includes the absolute value and relationship of an amount to other information.
 
material weakness A condition in which internal controls do not reduce to a relatively low level the risk that material errors or fraud may occur and not be detected in a timely period by employees in the normal course of their duties.
 
memos Written records supporting journal entries. Credit memos support credits, while debit memos support debit entries.
 
misappropriate To embezzle or appropriate dishonestly for one's own use.
 
misstatement Stated wrongly or falsely. Untrue financial statement information.
 
mitigating Reducing in force or intensity.
 
narrative A written description of an internal control system.
 
negative assurance A statement of what the CPA does not know as opposed to what the CPA believes (positive assurance). A statement that the CPA was "not aware of material modifications that should be made to financial statements for them to conform with U.S. generally accepted accounting principles" is negative assurance used in review reports.
 
negative confirmation request The negative form of accounts receivable confirmation asks the client's customer to respond only if the customer disagrees with the balance determined by the client. The positive form asks the customer to respond whether the customer agrees or disagrees with the client's receivable balance. The negative form is used when controls over receivables are strong and accounts receivable consists of many accounts with small balances. The positive form is used when controls are weak or there are fewer, but larger, accounts.
 
nonsampling risk is audit risk not due to sampling. An auditor may apply a procedure to all transactions or balances and fail to detect a material misstatement. Nonsampling risk includes the possibility of selecting audit procedures that are not appropriate to achieve a specific objective. For example, confirming recorded receivables cannot reveal unrecorded receivables. Nonsampling risk can be reduced to a negligible level through adequate planning and supervision.
 
objective A goal.
 
objectivity The internal auditors' objectivity depends on the organizational status of the internal audit function, whether the internal auditor has direct access and reports regularly to the board, the audit committee, or owner-manager, and who oversees internal auditor employment decisions.
 
obligations Assertions about obligations deal with whether liabilities are obligations of the entity at a given date. For example, management asserts that amounts capitalized for leases in the balance sheet represent the cost of the entity's rights to leased property and that the corresponding lease liability represents an obligation of the entity.
 
obliterate To do away with something so as to leave no trace.
 
observe (observation) Watch and test a client action (such as taking inventory).
 
occurrence Assertions about occurrence deal with whether recorded transactions have occurred during a given period. For example, management asserts that sales in the income statement represent the exchange of goods or services with customers for cash or other consideration.
 
online Access to a computer for immediate processing without having to wait for a batch of transactions to be processed at a later time.
 
operating effectiveness How an internal control was applied, the consistency with which it was applied, and by whom.
 
operating income from continuing operations is reported on an income statement.
 
opinion A CPA's conclusion held with confidence but not substantiated by positive knowledge or proof.
opinion paragraph The paragraph in the audit report that expresses the auditor's conclusions. The wording of the standard, unqualified opinion paragraph is: "In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of XYZ Company at December 31, year A, and the results of its operations and its cash flows for the year then ended in conformity with U.S. generally accepted accounting principles."
 
order is a listing of goods or services requested from a supplier with specifications and desired delivery method. A company starts the purchase process internally with a requisition, which results in an order being transmitted to a supplier. When the supplier ships the goods or provides the service, an invoice is sent to the customer telling the customer the specifications, delivery method, and price of those goods or services.
 
overall review The objective of the overall review stage of the audit is to assess conclusions reached, and evaluate the overall financial statement presentation. The overall review includes reading the financial statements and notes and considering adequacy of evidence gathered in response to unusual or unexpected balances. Results of an overall review may indicate the need for additional evidence.
 
parallel processing is the simultaneous performance of multiple operations, usually in reference to computer systems.
 
parity bit An extra bit added to a string of bits to increase the accuracy of data transmission.
 
password A sequence of characters required to gain access to a computer system. Passwords are used to restrict computer system access to only authorized persons.
 
payroll Department that determines amounts of wage or salary due to each employee.
 
peer review A practice monitoring program in which the audit documentation of one CPA firm is periodically reviewed by independent partners of other firms to determine that it conforms to the standards of the profession.
pending Legal proceedings not yet decided.
 
per diem An allowance for daily expenses. Often used to reimburse employees for estimated expenses as opposed to accounting for each small component of the expenses.
 
permanent audit documentation includes items of continuing accounting significance, such as the analysis of balance sheet accounts and contingencies. Such information from a prior year is used in the current audit and updated each year. Sometimes called the continuing file.
 
perpetrate Carry out an action such as a crime.
 
perpetual An inventory accounting system updated for each addition to inventory and each issuance from inventory, so the records indicate the exact quantity on hand at any moment. The alternative is a periodic inventory system where actual inventory on hand is determined only once a year.
 
personal financial statements of individuals present assets and liabilities at estimated current value on an individual's balance sheet (statement of financial condition). A statement of changes in net worth presents major changes in net worth during a period. The accrual basis is used for assets and liabilities, which are presented in order of liquidity and maturity, without classification as to current and noncurrent. The cash value of life insurance less the amount of loans against it is an asset. Deferred income tax on the difference between the income tax basis and estimated current values is presented between liabilities and equity.
 
personnel The department that maintains records of each individual's employment.
 
persuasive Having the power to influence. Most audit evidence is persuasive, but not conclusive.
pervasive Having the ability to permeate. An error is pervasive if it is material to more than one of the primary financial statements.
 
piecemeal opinion Expression of an opinion on an item in financial statements is not permitted as part of a disclaimer or adverse opinion on the financial statements as a whole because it would tend to overshadow or contradict a disclaimer of opinion or an adverse opinion.
 
plan Audit planning is developing an overall strategy for conduct and scope of the audit. The nature, extent, and timing of planning vary with size and complexity of the entity, experience with the entity, and knowledge of the business. In planning the audit, the auditor considers the entity's business and its industry, its accounting policies and procedures, methods used to process accounting information, the planned assessed level of control risk, and the auditor's preliminary judgment about audit materiality.
 
pledge Something given as security to guarantee payment of a debt.
 
population size The number of items in the population from which a sample is drawn.
 
positive assurance A statement as to what the CPA believes. An example is an opinion that the financial statements are presented fairly in conformity with U.S. GAAP. The opposite is negative assurance, a statement about what the CPA does not know. A statement that the CPA was "not aware of material modifications that should be made to financial statements for them to conform with U.S. generally accepted accounting principles" is negative assurance used in review reports.
 
positive confirmation (positive request) The positive form of receivables confirmation asks the customer to respond whether the customer agrees or disagrees with the client's reported receivable balance. The negative form of accounts receivable confirmation asks the client's customer to respond only if the customer disagrees with the balance determined by the client. The negative form is used when controls over receivables are strong and accounts receivable consists of many accounts with small balances. The positive form is used when controls are weak or there are fewer, but larger, accounts.
 
predecessor auditor The auditor of a client for a prior year who no longer audits that client.
 
presentation Assertions about presentation deal with whether particular financial statement components are properly classified and described. For example, management asserts that long-term liabilities in the balance sheet will not mature in one year. Similarly, management asserts that extraordinary items in the income statement are properly classified and described.
 
preventative control A control designed to avoid an unintended event.
 
principal auditor The auditor responsible for the greater portion of financial statements. The principal auditor may assume responsibility for the work of the other auditor or divide responsibility with the other auditor.
pro forma The objective of pro forma financial information is to show effects on historical financial information as if a proposed event had occurred earlier.
 
probability proportional to size (pps) sampling A sampling plan that bases the likelihood of selecting a particular account on the relative size of that account, so larger accounts have a greater probability of being selected for the sample than smaller accounts.
 
probable A contingent loss is probable if it is uncertain but likely to happen.
 
procedure An action, such as a step performed as part of an audit program or as part of the client's internal controls.
processing control is an internal control included in computer software designed to assure that all transactions are handled as authorized and none omitted or added.
 
production cycle The portion of an entity that acquires resources and converts them to the product or service for customers.
 
production order A document that initiates the manufacturing process.
 
proficiency as an auditor includes the auditor's formal education and subsequent experience. The independent auditor must undergo training adequate in technical scope, including commensurate general education. The assistant entering an auditing career must obtain experience with proper supervision and review of his or her work by a more experienced superior.
program An audit program is a listing of audit procedures to be performed in completing the audit. A computer program (software) is a listing of steps to be performed in processing the data.
 
programmed controls are built into computer software and include reasonableness tests, control totals, and sequence checks.
 
pronouncements of the FASB and GASB are rules that determine the principles for external financial reporting and disclosure.
prospective financial statements are either financial forecasts or financial projections. Prospective financial statements may cover a period that has partially expired. Statements for periods that have completely expired are not prospective financial statements.
 
prospectus A registration statement filed with the SEC includes audited financial statements (balance sheet, income statement, and statement of cash flows) for the previous three years. A prospectus contains the same information and must be supplied to all parties to whom offers are made. There is a twenty-day waiting period between the filing of the registration statement and the first sale of securities. During this period, preliminary ads and a "red herring" prospectus can be provided to offerees but must be clearly marked as preliminary.
 
proxy A power of attorney granting a third party the right to a stockholder's vote. When management or others solicit proxies from stockholders, a copy of the proxy statement must be filed with the SEC ten days before mailing the solicitation. The proxy statement must include all information relevant to the matter voted on.
 
purchase order A document from a buyer to a seller placing an order and listing quantities and specifications.
 
purport Intending to present.
 
qualified (qualify) An audit opinion that the financial statements as a whole are presented in conformity with U.S. GAAP, with the exceptions noted.
 
qualitative Relating to the quality of a trait, as opposed to quantitative, which means expressed as a number.
 
quality control systems provide a CPA firm with reasonable assurance that personnel comply with professional standards and the firm's standards of quality, independence, integrity, and objectivity. It covers personnel management, acceptance and continuance of clients, engagement performance, and monitoring.
 
quantitative (quantitatively) Expressed as a number, as opposed to qualitative measurement.
questionnaire An internal control questionnaire is a list of questions about the internal control system to be answered (with answers such as yes, no, or not applicable) during audit fieldwork. The questionnaire is part of the audit documentation of the auditor's understanding of the client's internal controls.
 
quick ratio Quick assets divided by current liabilities. Quick assets are current assets less inventories and prepaid expenses.
random sample (random-number sampling) Identical probability of each population item being selected for a sample. Also, the use of random numbers to select a random sample from a population.
 
ratio estimation In audit sampling a ratio of the proportion of errors in the sample applied to the population value to estimate total error.
 
ratio The relation between two quantities expressed as the quotient of one divided by the other. The ratio of 8 to 2 is written 8/2 and equals four. Financial statement ratios are used in analytical procedures in audits.
 
reasonable assurance (in audit report) An auditor works within economic limits. The audit opinion, to be economically useful, must be formed in a reasonable time and at reasonable cost. The auditor must decide, exercising professional judgment, whether evidence available within limits of time and cost is sufficient to justify an opinion.
 
reasonable assurance (in internal control) An internal control, no matter how well designed and operated, cannot guarantee that an entity’s objectives will be met because of inherent limitations in all internal control systems.
 
reaudit When an auditor is asked to audit and report on financial statements that have been previously audited and reported on.
 
recalculate Perform procedures again and compare to original results.
 
receiving report A document completed in the receiving department, which identifies the purchase order that initiated the purchase, and the date, quantity, and condition of goods received.
 
recomputation Perform procedures again and compare to original results.
 
reconcile (reconciliation) A schedule establishing agreement between separate sources of information, such as accounting records reconciled with the financial statements.
 
registration statement A statement submitted to officially provide the SEC with information about an offering of securities. A registration statement includes audited financial statements (balance sheet, income statement, and statement of cash flows) for the previous three years.
 
regression analysis A statistical method for finding the relationship between two or more variables. Also called least squares or linear regression.
 
regulation s-x is a regulation of the SEC that explains the format of information to be submitted to the SEC. It is entitled "Form and Content of and Requirements for Financial Statements, Securities Act of 1933, Securities Exchange Act of 1934, Public Utility Holding Company Act of 1935, Investment Company Act of 1940, and Energy Policy and Conservation Act of 1975."
 
related parties are those with whom the client has a relationship that might destroy the self-interest of one of the parties (accounting is based on measurement of arm's length transactions). Related parties include affiliates of the client, principle owners, management (decision makers who control business policy) and members of their immediate families.
 
reliable (reliability) Different audit evidence provides different degrees of assurance to the auditor. When evidence can be obtained from independent sources outside an entity, it provides greater assurance of reliability for an independent audit than that secured solely in the entity. More effective internal controls provide more assurance about reliability of the accounting data and financial statements. The independent auditor's direct personal knowledge, from physical examination, observation, computation, and inspection, is more persuasive than information obtained indirectly.
 
remittance Sending money to someone at a distance. A remittance advice is a paper record of the amount sent, purpose of the payment, and associated account identification.
 
remote A contingency with only a slight chance of occurring. In computer processing of information, a distant computer.
 
reperformance The repeating by the auditor of a computation made by the client to check its accuracy.
 
reportable condition Matters coming to the auditor's attention that are communicated to the audit committee because they are significant deficiencies in internal control which could adversely affect the ability to record, process, summarize, and report financial data.
 
representation A letter from management to the auditor representing that the financial statements are fairly presented. The letter is addressed to the independent auditor, and dated at the date of the auditor's report. It is signed by members of management whom the auditor believes are responsible for, and knowledgeable about, matters covered (chief executive officer and chief financial officer).
 
requisition A formal written request for something needed. A purchase by a company is initiated internally by a requisition, resulting in the issuance of a purchase order to the outside supplier.
 
revenue cycle The portion of a company that fills customer orders, accounts for receivables, and collects those receivables.
 
review To examine again. The overall review of audit documentation is completed after field work. A peer review is a practice monitoring program in which audit documentation of one CPA firm is periodically reviewed by independent partners of other firms to determine that they conform to professional standards. An analytical review is a type of substantive audit procedure. A review of financial statements of a nonpublic company is an engagement that results in the expression of less assurance than an audit, but more than in a compilation. A review of interim financial statements of a public company consists of analytical procedures and inquiries.
 
RFID or radio frequency identification tag is attached to and identifies a thing such as an item in inventory, a case of items, a pallet of cases, a car passing through a reader on a tollway, or a person passing through a doorway. A transceiver sends an activating signal and receives identification information. An active RFID tag has an internal battery and has a longer range than a passive tag which is powered by the radio signal it receives.
 
rights Assertions about rights deal with whether the entity has rights to the asset at a given date. For example, management asserts that amounts capitalized for leases in the balance sheet represent the cost of the entity's rights to leased property.
 
risk analysis An analysis of the possibility of suffering loss.
 
sample size The number of population items selected when a sample is drawn from a population.
 
sampling error Unless the auditor examines 100% of the population, there is some chance the sample results will mislead the auditor. This risk is sampling error. The larger the sample, the less chance of sampling error and the greater the reliability of the results.
 
sampling risk The possibility that conclusions drawn from the sample may not represent correct conclusions for the entire population.
 
Sarbanes-Oxley Act of 2002 established the Public Company Accounting Oversight Board and added requirements for publicly traded companies, their officers, boards and auditors. It increased penalties for corporate financial fraud.
 
SAS or Statements on Auditing Standards are interpretations of U.S. generally accepted auditing standards.
 
scope The type of engagement. The scope of an engagement might be a review, an audit, or a compilation. A scope limitation is a restriction on the evidence the auditor can gather.
 
scope paragraph The paragraph in the audit report that explains the scope of the engagement. The wording of the standard scope paragraph is: "We conducted our audit in accordance with U.S. generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion."
 
SEC or the Securities and Exchange Commission is an agency that administers Federal securities laws which require disclosure of information about publicly traded securities. The SEC investigates securities fraud and regulates securities exchanges and brokers.
 
second request When an auditor confirms receivables, some customers of the client fail to respond to the first confirmation request. Another request sent to the same customers is the second request.
 
secured transaction Right to repossess goods as security for payment of a debt.
 
segregation of duties means assigning different people the responsibilities of authorizing transactions, recording transactions, and maintaining custody of assets. Segregation of duties reduces the opportunities for one person to both perpetrate and conceal errors or fraud.
 
self-checking digit An extra digit is added to a number. The extra digit is computed from the other digits in the number. The computer program can then check input by recomputing and comparing the check digit. This is a useful control over the input of account numbers.
 
service auditor The auditor of an organization that provides services such as data processing or pension trust administration to other organizations (the users). Auditors of the users (user auditors) rely on a report from the service auditor about controls in the service organization that apply to financial statements of the user organization they are auditing.
 
shipping document A document prepared when goods are shipped. It lists the date shipped, the customer, method of shipment, and quantities and specifications of goods shipped.
 
simulation Representation of the operation or features of one process or system through the use of another. Computer simulation of waiting lines can determine the number of employees needed to serve customers at a particular time.
 
single audit act This federal legislation requires state and local governments that receive federal aid of $500,000 or more in a fiscal year to have an audit under the act. A government that receives less than $500,000 can have an audit under the act or with specific laws and regulations of programs in which the government participates. Auditors report whether the audited entity has followed laws and regulations that may have a material effect on each major federal aid program.
 
software Programs and languages that control computer hardware.
 
specialist An expert at activities not usually done by auditors (such as an appraiser for valuation).
sqcs Statement on Quality Control Standards.
 
SSARS or Statements on Standards for Accounting and Review Services are pronouncements concerning unaudited financial information of a nonpublic entity issued by the AICPA Accounting and Review Services Committee.
 
standard deviation A statistic used to measure dispersion equal to the square root of the arithmetic mean of the squares of the deviations from the arithmetic mean.
 
statistical Making inferences in uncertain situations using applied mathematics. Measurements from a small group, the sample, are used to infer the behavior of a larger group, the population. Probability theory determines how well the sample represents the population.
 
stop-or-go sampling Taking a sample from a population and checking after each sample item is drawn whether the sample supports a desired conclusion. Sampling ceases as soon as that conclusion is supported.
 
stratify To arrange a population or a sample in distinct layers. Stratified sampling is used in auditing to select a greater percentage of accounts with high balances than of accounts with low balances.
 
subject to Years ago there was a type of qualified audit opinion that was worded "In our opinion, subject to....." Auditors are no longer permitted to issue such opinions.
 
subsequent events affect the client and occur between the balance sheet date and issuance of the financial statements. Some such events provide additional evidence about conditions that existed at the balance sheet date, such as the bankruptcy of a customer with a history of financial difficulty. The financial statements are adjusted to reflect this evidence. Evidence about conditions that did not exist at the balance sheet date, such as fire that destroyed the client's plant after the balance sheet date, may be so significant as to require disclosure.
 
subsidiary ledger The detailed information that totals to the balance in the general ledger account. The total of all customer accounts receivable included in the subsidiary ledger of accounts receivable is the balance in the general ledger accounts receivable account.
 
substantiated Supported with proof or evidence.
 
substantive A substantive audit procedure is a direct test of a financial statement balance.
 
successor auditor The auditor of a client for the current year when that client had another auditor in prior years. The auditor who is no longer the auditor of that client is the predecessor auditor.
 
sufficiency (sufficient) A measure of the quantity of audit evidence. The independent auditor's objective is to obtain sufficient competent evidence to provide a reasonable basis for forming an opinion.
 
supervise Supervision is directing efforts of assistants in the audit and determining whether objectives were accomplished. Elements of supervision include instructing assistants, keeping informed of problems, reviewing work performed, and dealing with differences of opinion among firm personnel. The appropriate extent of supervision depends on the complexity of subject matter and qualifications of persons performing the work.
 
suppliers provide goods or services to an audited entity. Sometimes called vendors.
 
systrust engagements A CPA tests a business system for its ability to operate without material error and reports on its reliability.
 
test A sample from a population to estimate characteristics of the population.
 
test count As part of inventory audit procedures auditors normally observe the client's employees counting physical inventory. A test count is inventory counted by the auditors to check the client's count.
 
test data is run through a computer program to test the software. Test data can be used to test compliance with controls in the software.
 
test of controls (tests of the operating effectiveness of internal controls) Auditors evaluate the design of controls, then determine if the controls are in operation. In order to rely on the controls they must also obtain evidence as to whether the controls are operating effectively.
 
test of detail Direct tests of financial statement balances (substantive audit procedures) that are not analytical procedures. If tests of details are performed as tests of controls as well as substantive tests they are "dual-purpose" tests.
 
tick marks in audit work papers are footnotes represented by a symbol instead of by a number. They indicate procedures that have been carried out on specific items in the work papers.
 
times interest earned Income before interest and taxes divided by interest expense.
tolerable deviation rate is the maximum rate of deviation from an internal control that will allow the auditor to place the planned reliance on that control.
 
tolerable misstatement When planning a sample for a substantive test of details, the auditor considers how much monetary misstatement may exist without causing the financial statements to be materially misstated. This maximum misstatement is called tolerable misstatement for the sample.
 
trace Follow a transaction through the steps of the system.
 
treasurer The officer who controls the entity's funds. The treasurer normally signs checks and is responsible for cash management.
 
treasury stock is stock of the corporation that has been issued and later reacquired. It is not an asset. It is a reduction of stockholders' equity. Treasury stock can be recorded at either its cost or its par value.
 
trend analysis An analysis of the change in something over time. Analytical procedures, which compare financial statement ratios of different years, are an example of trend analysis.
 
trial balance A statement of open debit and credit accounts in a ledger to test their equality.
turnover Inventory turnover is a measure of the time from receipt of inventory to its sale. It is found by dividing cost of sales by average inventory. Receivables turnover is a measure of the time it takes to collect receivables. It is found by dividing net credit sales by average net receivables. Employee turnover is the rate at which new employees replace old employees.
 
unqualified An audit opinion that the financial statements are in conformity with U.S. GAAP.
 
update (updated) If an auditor notices events that affect financial statements on which an audit report has been issued, they are considered when updating the report on the prior statements. If those statements are changed, the report says they have been restated and expresses the appropriate opinion. If an updated opinion differs from the previous opinion, an explanatory paragraph preceding the opinion paragraph explains that the report has been updated, discloses the date and type of opinion previously expressed, and events that caused the revision.
 
user auditor A "service auditor" is the auditor of an organization that provides services such as data processing or pension trust administration to other organizations (the users). Auditors of the users (user auditors) rely on a report from the service auditor about controls in the service organization that apply to financial statements of the user organization they are auditing.
 
validity check Software control over input of data to a computer system. Data is compared with the type of data properly included in each input field, e.g., only letters in a name field.
 
valuation An assertion made by management that each asset and liability is recorded at an appropriate carrying value.
 
value-added network A telecommunications network providing communication facilities, which enhance basic telecommunications services. They add value by passing, storing and converting messages. Also known as service providers and EDI service providers. Operated by a clearing house, an organization that provides message/file collection, routing and distribution service on behalf of other organizations.
 
variable sampling The characteristic tested has many possible values (such as dollar value of inventory).
 
variance A statistical measure of dispersion in a population. The variance is the square of the standard deviation. The standard deviation equals the square root of the arithmetic mean of the squares of deviations from the arithmetic mean.
 
vendors provide goods or services to an audited entity. Also called suppliers.
 
verify (verification) Prove accuracy of numbers or existence of assets.
 
vouch Prove accuracy of accounting entries by tracing to supporting documents.
 
voucher A document in support of an expenditure. The signature of an appropriate official on the voucher is authorization for the treasurer to issue a check.
 
webtrust engagements A CPA issues an opinion on a web site when the business and information privacy practices, transaction integrity, and protection of customer information meet certain standards.
 
working papers (written audit documentation) Records kept by the auditor of procedures applied, tests performed, information obtained, and pertinent conclusions in the engagement.
 
write-off Cancellation of part or all of a balance. Costs incurred that have no future utility are charged (written-off) to an expense or loss account, not carried forward as an asset.
 
write-up In dollar terms a write-up is an intentional over-valuation of assets. In narrative terms a description of something or some event.