EPSO Auditors key terms

The threshold above which a misstatement or omission could reasonably influence the decisions of users of financial statements or audit reports. Auditors set it by judgement, often as a percentage of revenue, total assets or expenditure.

The risk that an auditor expresses an inappropriate opinion on financial statements that are materially misstated. It combines inherent risk, control risk and detection risk, and drives how much testing is planned.

An attitude of questioning mind and alertness to conditions suggesting possible misstatement, whether from error or fraud. It requires auditors to challenge evidence and management explanations rather than accept them at face value.

Information used by the auditor to reach conclusions on which the opinion is based. It must be sufficient in quantity and appropriate in quality, meaning relevant and reliable, with external written evidence generally stronger than internal assertions.

The processes, policies and organisational structures designed to provide reasonable assurance about achieving objectives: reliable reporting, effective operations and compliance with rules. Auditors assess control design and test whether controls operate as described.

Procedures that detect material misstatements at the assertion level, including tests of detail on transactions and balances and analytical procedures. They are performed regardless of assessed control risk, though the extent varies.

The risk that the auditor's conclusion based on a sample differs from the conclusion that would be reached by testing the whole population. It is controlled through sample size, selection method and evaluation of results.

The state of being free from relationships or interests that could compromise objectivity, in fact and in appearance. For auditors it underpins the credibility of the opinion and is supported by rotation, fee and employment safeguards.

The formal declaration issued after an EU audit, stating whether the accounts are reliable and the underlying transactions legal and regular. It may be unqualified, qualified, adverse or a disclaimer, and is published in the Official Journal.

The two compliance dimensions of EU budget spending: transactions must comply with applicable law (legality) and with the detailed rules governing them (regularity). Both are covered by the annual statement of assurance.

A governance framework separating management control (first line), independent risk and compliance functions (second line) and internal audit (third line). It clarifies accountability for risk and supports reliance by external auditors.

The accounting objective that financial statements present information faithfully, completely and without bias, so that users can rely on them. It overrides mere formal compliance when the two conflict in some frameworks.

Recording transactions when the economic event occurs, not when cash moves. Revenue is recognised when earned and expenses when incurred, giving a more faithful picture of financial position and performance than cash accounting.

The assumption that an entity will continue operating for the foreseeable future, without intention or need to liquidate or curtail operations. If doubtful, disclosures or a modified audit opinion may be required.

Liabilities of uncertain timing or amount, recognised when a present obligation arises from a past event, an outflow is probable and the amount can be reliably estimated. They differ from contingent liabilities, which are only disclosed.

A reduction in the recoverable amount of an asset below its carrying amount, recognised as a loss. Testing involves comparing carrying value with fair value less costs to sell or value in use.

Combining the financial statements of a parent and its controlled entities into a single set, eliminating intra-group balances. Control, rather than ownership percentage alone, determines whether an entity is included.

Recording and reporting against authorised appropriations, showing commitment, payment and carry-over stages. It tracks compliance with the budget authority rather than only economic substance, and coexists with accrual reporting in the EU accounts.

Amounts authorised in the EU budget for a given purpose and period. Commitment appropriations allow obligations to be entered into; payment appropriations allow cash to be paid out during the year.

A legal pledge to spend budget funds on a specific action, reserving the corresponding commitment appropriation. It precedes payment and, if unused within the allowed period, may be decommitted or carried over.

A reduction or recovery of EU funding imposed when expenditure breaches applicable rules, restoring the budget's legality. It may be applied by the Commission or member state authorities and can be flat-rate or calculated.

Revenue accruing to the EU budget, comprising customs duties, the VAT-based resource, the plastic-based resource and the GNI-based resource. They fund the budget and are subject to specific control and audit arrangements.

The EU's long-term spending plan, setting maximum annual amounts per policy heading for a period of several years. It constrains the annual budget and shapes audit priorities across programmes.

The EU's yearly act authorising expenditure and revenue, adopted within the ceilings of the multiannual financial framework. It must balance, and its implementation is audited and reported on each year.

The Commission's integrated report on implementation of the EU budget, combining management, performance and internal control information. It supports accountability and feeds into the discharge and audit processes.

The European Parliament's formal decision, on a Council recommendation, closing the budget implementation of a given year. It follows audit and political scrutiny and can be refused or postponed.

A delivery mode where the Commission entrusts budget implementation to member states while retaining ultimate responsibility. It dominates cohesion and agricultural spending and shapes how audit evidence is obtained and assessed.

A binding EU legal act of general application that is directly applicable in all member states without transposition. It is distinct from a directive, which requires national implementing measures.

A binding EU legal act that sets objectives member states must achieve, leaving the choice of form and method to national authorities. Transposition into national law within a deadline is required.

A binding EU legal act that is specific to those to whom it is addressed, or has no addressee. It is used, for example, for state aid rulings and appointments.

The accumulated body of EU law, rights and obligations that member states must accept and apply, including treaties, legislation and case law. Candidate countries adopt it as part of accession.

A procedure in which a national court asks the Court of Justice to interpret EU law needed to decide a case. The ruling binds the referring court and clarifies the uniform application of EU law.

The principle that the EU acts only where objectives cannot be sufficiently achieved by member states and can be better achieved at EU level. It limits and conditions the exercise of shared competences.

The principle that EU action must not exceed what is necessary to achieve treaty objectives. It governs the content and form of EU measures and is frequently invoked in litigation.

Drawing a necessary conclusion from given premises, so that if the premises are true the conclusion cannot be false. Test items usually ask which conclusion follows, not which is merely plausible.

A form of deductive argument with two premises and a conclusion, often using quantifiers such as all, some and none. Validity depends on structure, not on whether the content is factually true.

An unstated premise the argument needs in order for its conclusion to follow. Identifying it means finding what must be true for the reasoning to hold, not what is merely likely or supportive.

A conclusion drawn from evidence or premises. In verbal reasoning tests, the correct inference is the one that follows necessarily from the passage, not one that merely seems sensible in the real world.

Showing that evidence or a consideration makes the conclusion less likely to follow from the stated premises. The strongest weakener attacks the link between premises and conclusion rather than adding unrelated doubt.