CPAEAM flashcards
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32 cards. Read the term and the definition here. The deck at the top of this page is optional.
- Relevance
- A fundamental qualitative characteristic meaning information is capable of making a difference in decisions, having predictive value, confirmatory value, or both.
- Faithful representation
- A fundamental qualitative characteristic requiring information to be complete, neutral, and free from material error, depicting the economic substance of transactions.
- Revenue recognition steps
- Identify the contract, identify performance obligations, determine transaction price, allocate price to obligations, and recognize revenue when each obligation is satisfied.
- Lower of cost and NRV
- Inventory measurement rule under PAS 2: inventory is written down to net realizable value when NRV falls below cost, with the write-down recognized as an expense.
- Impairment loss
- The amount by which an asset's carrying amount exceeds its recoverable amount, measured as the higher of fair value less costs of disposal and value in use.
- Control in consolidation
- Power over the investee, exposure to variable returns, and ability to use power to affect those returns; ownership above fifty percent generally indicates control.
- Goodwill formula
- Consideration transferred plus noncontrolling interest plus previously held interest minus the fair value of identifiable net assets acquired; not amortized but tested for impairment.
- Equity method
- Investment initially at cost, increased by share of profit and decreased by dividends; losses limited to carrying amount plus other commitments.
- Bargain purchase gain
- Gain recognized in profit or loss when the fair value of identifiable net assets acquired exceeds the aggregate of consideration, noncontrolling interest, and previously held interest.
- Translation reserve
- Exchange differences arising from translating foreign operations, recognized in other comprehensive income and recycled to profit or loss on disposal.
- Audit risk model
- Audit risk equals inherent risk times control risk times detection risk; detection risk is the auditor's responsibility and is inversely related to assessed risks.
- Professional skepticism
- An attitude of questioning mind and critical assessment of audit evidence, including attention to contradictory information and reliability of documents.
- Performance materiality
- An amount set lower than overall materiality to reduce the probability that aggregate uncorrected and undetected misstatements exceed materiality.
- Reasonable assurance
- A high but not absolute level of assurance, limited by sampling risk, estimation uncertainty, and the nature of audit evidence.
- Independence threats
- Self-interest, self-review, advocacy, familiarity, and intimidation threats that must be evaluated and addressed to maintain independence in mind and appearance.
- Risk assessment procedures
- Inquiries of management, analytical procedures, and observation and inspection performed to obtain an understanding of the entity and its environment.
- Tests of controls
- Audit procedures performed to evaluate the operating effectiveness of controls in preventing, or detecting and correcting, material misstatements.
- External confirmation
- Audit evidence obtained as a direct written response from a third party, commonly used for bank balances, receivables, and contract terms.
- Sampling risk
- The risk that the auditor's conclusion based on a sample differs from a conclusion based on the entire population.
- Going concern uncertainty
- Material uncertainty about the entity's ability to continue as a going concern, disclosed by the auditor in an emphasis of matter or other matter paragraph.
- Written representations
- Required written statements from management and, where appropriate, those charged with governance confirming responsibilities and completeness of information provided to the auditor.
- Graduated income tax
- Progressive tax rates applied to net taxable income of individuals, after allowable deductions, personal exemptions, and mandatory contributions.
- Eight percent flat tax
- An optional tax on gross sales or receipts of self-employed individuals and professionals in lieu of graduated income tax and percentage tax, subject to registration.
- Input VAT credit
- Value-added tax paid on purchases of goods, properties, and services that is creditable against output VAT on sales, with excess carried over or refunded under conditions.
- Zero-rated sales
- Sales subject to zero percent VAT, such as export sales and foreign currency denominated sales, allowing credit or refund of input VAT.
- Estate tax
- Tax imposed on the net estate of a decedent, computed as gross estate less allowable deductions, standard deduction, and the share of the surviving spouse.
- Contract requisites
- Consent, object, and cause; consent is vitiated by mistake, violence, intimidation, undue influence, or fraud.
- Partnership by estoppel
- A partnership arising when a person represents himself as a partner to third parties who rely on the representation, making him liable to them.
- Holder in due course
- A holder who takes a negotiable instrument for value, in good faith, and without notice of defects, free from personal defenses.
- Break-even point
- The sales level at which total revenues equal total costs, computed as fixed costs divided by contribution margin per unit or contribution margin ratio.
- Net present value
- The present value of cash inflows minus the initial investment; a positive NPV indicates the project is acceptable.
- Relevant costs
- Future costs that differ among alternatives; sunk costs and allocated common fixed costs are irrelevant to decision-making.