Egypt Accountants & Auditors Register Exam flashcards

34 cards. Read the term and the definition here. The deck at the top of this page is optional.

Accounting equation

Assets equal liabilities plus equity. Every transaction affects at least two elements while keeping the equation balanced, which is why the trial balance debits and credits agree.

Accrual basis

Revenue is recognised when the performance obligation is satisfied and expenses when incurred, regardless of when cash is received or paid. It differs from the cash basis.

Net realisable value

Estimated selling price in the ordinary course of business less estimated costs of completion and costs to sell. Inventory is measured at the lower of cost and this amount.

Bank reconciliation purpose

Explains differences between the cash book and the bank statement caused by unpresented cheques, deposits in transit, bank charges, interest and errors, arriving at the corrected cash balance.

Detection risk

The risk that audit procedures fail to detect a material misstatement. It is controlled by the auditor through the nature, timing and extent of procedures and sample size.

Performance materiality

An amount set below overall materiality to reduce to an appropriately low level the probability that uncorrected and undetected misstatements together exceed overall materiality.

Adverse audit opinion

Issued when the auditor obtains sufficient evidence that misstatements are both material and pervasive to the financial statements, so they are not presented fairly.

Disclaimer of opinion

Issued when the auditor is unable to obtain sufficient appropriate evidence and the possible effects are material and pervasive, so no opinion can be expressed.

IFRS 15 five steps

Identify the contract, identify performance obligations, determine the transaction price, allocate it to obligations, and recognise revenue when each obligation is satisfied.

Right-of-use asset

Under IFRS 16 the lessee recognises an asset representing its right to use the leased item, measured initially at the lease liability plus initial direct costs and prepayments.

Expected credit losses

Under IFRS 9, an allowance measured at the present value of expected shortfalls in contractual cash flows, recognised from initial recognition and updated each reporting date.

Revaluation surplus

The increase on revaluing property, plant and equipment under IAS 16, recognised in other comprehensive income and accumulated in equity rather than in profit or loss.

Reasonable assurance

The high but not absolute level of assurance an audit provides, limited by judgement, sampling, the nature of evidence and the possibility of collusion or concealment.

Fraud risk in revenue

ISA 240 requires the auditor to presume a risk of material misstatement due to fraud in revenue recognition, unless that presumption is rebutted and the reason documented.

Key audit matters

Matters of most significance in the audit of the current period, selected from those communicated to those charged with governance, and described in the auditor's report for listed entities.

Audit documentation

Records of procedures performed, evidence obtained and conclusions reached, sufficient to enable an experienced auditor with no prior connection to the engagement to understand the work.

Egyptian corporate tax rate

The standard rate of corporate income tax on profits of companies subject to Egyptian income tax law is 22.5 percent, with special rules for small enterprises.

Egyptian VAT standard rate

The general value added tax rate applied to taxable supplies of goods and services in Egypt is 14 percent, with reduced rates for specified items and zero rating for exports.

Input VAT recovery

VAT paid on purchases is deductible from output VAT only when the purchase relates to taxable business activity; non-recoverable items are excluded by law.

Salary tax withholding

Employers deduct employment income tax monthly from salaries after the personal exemption and applying progressive brackets, then remit the withheld amount to the tax authority.

Joint stock company

An Egyptian company whose capital is divided into equal transferable shares, whose shareholders are liable only to the extent of their shares, and which is managed by a board.

Limited liability company

A company with a separate legal personality in which partners are liable only up to their capital contributions; it is not permitted to offer shares to the public.

Extraordinary general assembly

The shareholders' meeting competent to amend the articles of association, increase or reduce capital, and decide on merger, demerger or liquidation, subject to statutory quorum rules.

Independence of mind

The state of mind enabling the auditor to act with integrity, objectivity and professional scepticism, uninfluenced by conflicts of interest, relationships or pressure from the client.

Self-review threat

Arises when the auditor evaluates results of work previously performed by the firm, such as preparing records later audited, because objectivity may be compromised.

Contingent fee prohibition

Audit fees may not be contingent on the outcome of the engagement, because such arrangements create a self-interest threat to objectivity and independence.

Break-even point

The volume of sales at which total contribution equals fixed costs and profit is zero, computed as fixed costs divided by contribution per unit.

Margin of safety

The excess of budgeted or actual sales over break-even sales, expressed in units, revenue or as a percentage, indicating how far sales may fall before a loss arises.

Overhead absorption rate

Budgeted production overhead divided by a budgeted activity base such as labour hours or machine hours, used to charge overhead to products under absorption costing.

Relevant cost

A future cash flow that differs between alternatives. Sunk costs and apportioned fixed overhead are excluded; opportunity cost of the alternative forgone is included.

IT general controls

Controls over access, program changes, backup and recovery and operations that support the reliable functioning of application controls and the integrity of financial data.

Computer-assisted audit techniques

Tools such as data analytics, test data and parallel simulation that let the auditor test entire populations or recalculate client data directly from source files.

Net present value

The sum of discounted future cash flows minus the initial investment. A positive result means the project earns more than the required rate of return.

Weighted average cost of capital

The blended required return on a firm's equity and debt, weighted by market values, with interest on debt adjusted for the tax shield.